THE  LIBRARY 

OF 

THE  UNIVERSITY 

OF  CALIFORNIA 


GIFT  OF 

Professor 
Benjamin  Ift.  Bernstein 


fidential 


THE  CARNEGIE  FOUNDATION 
FOR  THE  ADVANCEMENT  OF  TEACHING 

• 

A  COMPREHENSIVE  PLAN 

OF  INSURANCE  AND  ANNUITIES 

FOR  COLLEGE  TEACHERS 


1916 


Digitized  by  the  Internet  Archive 

in  2008  with  funding  from 

IVIicrosoft  Corporation 


http://www.archive.org/details/comprehensiveplaOOcarnrich 


Confidential 


THE  CARNEGIE  FOUNDATION 
FOR  THE  ADVANCEMENT  OF  TEACHING 

A  COMPREHENSIVE   PLAN   OF   INSURANCE 
AND  ANNUITIES  FOR  COLLEGE  TEACHERS 


576  FIFTH  AVENUE 

NEW  YORK  CITY 

1916 


/• 


^M^'^^M' 


^Jt4y^^ 


GIFT 


D.  B.  UPDIKE  •  THE  MEREYMOUNT  PRESS  •  BOSTON 


CONTENTS 

PAGE 

Introduction  v 

Ten  Years  of  Administration  3 

Pensions  and  Annuities  5 

The  Origin  of  Pension  Systems  6 

The  Social  Philosophy  of  the  Pension  System  9 

Is  a  Pension  System  for  College  Teachers  Justified?  11 

The  Life  Hazards  of  the  College  Teacher  16 

Who  is  Responsible  for  the  College  Teacher's  Protection  ?  18 

The  Function  of  Life  Insurance  and  its  Possibilities  22 

The  Cost  of  an  Old  Age  Annuity  28 

Illustrations  from  the  Lives  of  Representative  Teachers  31 

Are  Pensions  Wages?  34 

Teachers'  Investments  36 

The  Financial  Load  upon  the  College  87 

The  Accrued  Liabilities  41 

The  Risk  of  Disability  43 

The  Teacher's  Cooperation  45 
The  Cooperation  of  the  College,  the  Teacher,  and  the  Carnegie  Foundation         48 

The  Present  Pension  System  of  the  Carnegie  Foundation  52 

The  Desires  of  Teachers  58 

The  Opinions  of  Retired  Teachers  59 


574 


INTRODUCTION 

The  paper  which  follows  is  a  confidential  report  to  the  trustees  of  the  Carnegie  Foun- 
dation and  to  the  teachers  of  the  colleges  and  universities  associated  with  the  Founda- 
tion. It  is  here  offered  for  critical  study  and  discussion  and  to  invite  a  fiill  expression 
of  opinion  upon  the  questions  involved. 

This  study  is  the  result  of  ten  years  of  experience  in  the  administration  of  the 
existing  pension  system  and  of  the  examination  of  pension  systems  throughout  the 
world.  It  is  founded  upon  exhaustive  actuarial  computation. 

The  reason  for  the  existence  of  such  a  report  lies  in  the  desire  to  correct  the  weak- 
nesses of  the  present  system  as  experience  has  revealed  them,  and  to  create  a  feasible 
and  sound  pension  system  available  not  only  to  the  colleges  at  present  associated  with 
the  Foundation,  but  available  also  to  the  great  body  of  college  teachers. 

The  chief  weaknesses  of  the  existing  system  of  pensions  maintained  by  the  Carnegie 
Foundation  are  these: 

1.  Under  the  present  rules,  a  teacher  acquires  protection  for  himself  and  his  fam- 
ily only  after  twenty-five  years  of  service  as  a  professor  or  thirty  years  of  service  as 
professor  and  instructor.  He  is  nearly  sixty  years  of  age  before  the  pension  system 
affords  him  protection  even  against  disability.  Of  the  teachers  who  begin  as  instruc- 
tors at  the  age  of  thirty,  nearly  half  will  die  before  reaching  a  pensionable  age.  Dur- 
ing the  period  of  their  productive  life,  their  families  i-eceive  no  relief  from  the  pension 
system.  It  is  precisely  at  this  period  that  some  form  of  protection  against  the  hazard 
of  the  loss  of  the  bread-winner  is  needed.  The  most  pathetic  cases  presented  to  the 
Carnegie  Foundation — cases  which  unfortunately  lie  without  its  rules  —  are  those 
in  which  a  wife  with  young  children  is  left  helpless  by  the  death  of  her  husband.  A 
considerable  proportion  of  college  teachers  cany  no  insurance ;  and,  at  the  cost  of 
insurance  as  now  accessible  to  them,  the  average  teacher  is  able  to  carry  an  amount 
quite  inadequate  as  a  protection  to  his  wife  and  children. 

2.  Quite  naturally  the  Founder  and  trustees  approached  the  question  of  pensions 
from  the  standpoint  of  the  man  about  to  leave  the  service.  It  is  now  clear  that  jftljf 
pension  system  is  to  provide  some  security  for  the  great  body  of  teachers  and  for  their 
families  against  the  hazards  of  death,  of  disability,  and  of  helplessness  in  old  age,  the 
problem  must  be  approached  from  the  standpoint  of  the  teacher  entering  the  service. 

3.  The  endowment  placed  in  the  hands  of  the  trustees  was  given  in  a  most  generous 
spirit,  and  was  intended  to  pay  pensions  for  college  teachers  under  rules  such  as  the 
trustees  might  consider  wise.  There  is  no  reason  why  the  most  high-spirited  and  sen- 
sitive teacher  should  not  accept  a  pension  given  in  accordance  with  the  present  rules. 
These  pensions  have  been  accepted  by  American  teachers  in  this  spirit. 

When  the  study  of  the  pension  system  is  approached,  however,  from  the  standpoint 
of  the  man  entering  the  service,  a  true  social  philosophy  no  less  than  sound  economic 
reason  points  to  a  system  to  which  both  the  teacher  and  the  institution  which  he 


vi  INTRODUCTION 

serves  contribute.  The  history  of  pensions  also  makes  it  clear  that  it  is  to  the  finan- 
cial interest  of  the  teachers  that  the  payment  of  pensions  be  separated  from  the  ques- 
tion of  salary.  A  large  correspondence  with  teachers  in  the  associated  colleges  makes 
it  clear,  moreover,  that  they  would  prefer  to  bear  a  share  in  a  sound  insurance  and 
pension  system  if  a  plan  within  their  means  can  be  devised  and  assured. 

4.  From  the  beginning  it  has  been  pointed  out  in  the  reports  of  the  president  that 
any  pension  system  resting  upon  a  fixed  endowment  must  inevitably  reach  its  limit, 
and  that  the  resources  of  the  Foundation,  and  any  addition  likely  to  be  made  to  them, 
would  provide  a  pension  system  in  only  a  limited  number  of  institutions.  Seventy- 
three  universities  and  colleges  in  the  United  States  and  Canada  at  present  share  in 
the  benefits  of  the  pension  endowment.  The  total  income  available  for  pensions  is 
approximately  $799,000.  Last  year,  the  cost  of  the  pension  system  in  these  seventy- 
three  institutions  amounted  to  $554,000.  It  is  pointed  out  later  that  the  moi-tality 
experience  of  the  Foundation  during  these  ten  years  has  been  far  below  the  most 
conservative  tables,  and  the  cost  correspondingly  greater. 

Mr.  Carnegie  has  placed  behind  the  institutions  he  has  founded  a  great  corpora- 
tion with  an  income  far  beyond  the  load  which  would  be  imposed  by  the  present  pen- 
sion system.  It  is,  however,  clear  that  the  Carnegie  Foundation  would  not  be  justi- 
fied in  asking  this  corporation  to  carry  for  an  indefinite  future  a  continually  growing 
financial  load  for  a  pension  system  available  to  a  very  limited  number  of  institutions. 
A  fiscal  policy  must  be  evolved  under  which  the  Foundation  shall  be  able  to  conduct 
a  pension  system  financially  sound,  within  its  own  resources,  and  offering  a  security 
to  teachers  equivalent  to  that  of  an  insurance  policy  in  a  sound  company.  The  col- 
lege teacher  who  looks  ten,  twenty,  or  thirty  years  ahead  to  the  benefits  of  a  pension 
system  will  be  satisfactorily  protected  only  when  he  has  a  contract.  The  existing 
pension  system  cannot  offer  this. 

5.  The  maintenance  of  a  free  pension  system  in  a  limited  number  of  colleges  tends 
to  restrict  the  migration  of  teachers  from  one  college  to  another.  It  is  in  the  interest 
of  education  that  such  migrations  be  free,  and  that  no  tariff"  wall  be  put  in  the  way  of 
the  transfer  of  a  teacher  from  one  college  to  another.  It  is  clear  also  in  the  light  of 
ten  years'  experience  that  the  selection  of  a  small  group  upon  which  to  confer  free 
pensions  to  the  exclusion  of  others  involves  many  other  difficulties.  In  a  given  state 
or  province,  for  example,  no  conclusive  reason  can  be  offered  in  some  cases  for  dis- 
criminating in  the  matter  of  pensions  between  college  A  and  college  B.  A  compre- 
hensive pension  system  admitting  the  teachers  of  all  institutions  of  recognized  stand- 
ing, and  offering  a  fair  opportunity  to  the  individual  teacher  as  well,  is  clearly  in  the 
interest  of  the  great  body  of  teachers. 

6.  In  view  of  these  considerations,  the  important  question  arises :  Can  a  contribu- 
tory system  be  devised  in  which  the  teacher,  his  college,  and  the  Carnegie  Founda- 
tion may  cooperate;  which  shall  rest  upon  a  true  social  philosophy  and  upon  a  sound 
financial  basis;  which  shall  offer  a  fair  measure  of  protection  to  the  teacher  and  his 


INTRODUCTION  vii 

family  during  his  entire  academic  career;  which  shall  be  capable  of  extension  to  the 
great  mass  of  college  teachers,  and  shall  with  all  this  lie  within  the  financial  ability 
of  the  teacher  and  his  college?  It  is  this  fundamental  and  far-reaching  question  which 
the  report  and  the  ten  years'  study  that  lie  back  of  it  have  undertaken  to  answer. 

7.  A  system  of  protection  for  college  teachers  is  here  proposed  within  the  reach 
of  the  teacher's  financial  ability  and  comparable  in  many  cases  with  the  sum  now 
paid  out  by  teachers  for  inadequate  insurance.  The_plan  is  based  upon  a  combination 
of  low-priced  insurance  with  an  annuity.  To  carry  out  the  plan  will  require  the  estab- 
lishment of  a  sub-agency  of  the  Foundation  with  sufficient  capital  to  issue  such  in- 
surance and  annuity  policies.  The  plan  is  worked  out  in  detail  in  the  report  which 
follows.  It  offers  a  solution  of  the  pension  question  which  is  believed  to  be  just,  ade- 
quate, and  available  to  the  great  body  of  American  teachers.  The  fundamental  prin- 
ciples adopted  here  are  the  following,  and  are  applicable  to  any  relief  system  main- 
tained for  groups  of  the  body  politic,  whether  they  be  industrial  workers  or  college 
teachers : 

I.  A  definite  estimate  of  the  life  hazards  against  which  protection  is  sought  must 
form  the  first  step  in  determining  the  pension  or  relief  system  to  be  adopted. 

II.  The  system  must  be  constructed  from  the  point  of  view  of  the  man  or  woman 
entering  the  service  rather  than  from  the  point  of  view  of  the  one  leaving  it. 

III.  A  solution,  to  be  complete,  must  rest  upon  some  combination  of  low-priced 
insurance  with  an  annuity,  and  must  offer  to  the  participant  a  contract. 

IV.  As  our  social  order  is  now  organized,  the  responsibility  for  a  system  of 
protection  for  men  and  women  on  fixed  pay  rests  jointly  upon  employee  and 
employer. 

V.  So  far  as  pensions  for  college  teachers  are  concerned,  the  Carnegie  Foundation 
has  a  direct  responsibility,  and  will  discharge  that  responsibility  best  if  it  is  able 
to  inaugurate  a  system  of  protection  for  college  teachers  against  the  capital  haz- 
ards of  their  professional  life,  which  is  not  only  socially  just  and  economically 
feasible,  but  which  will  be  available  to  the  great  body  of  college  teachers. 

8.  This  plan,  if  adopted,  would  substitute  for  the  present  system  an  entirely  dif- 
ferent one.  The  substitution  of  the  one  system  for  the  other  involves  a  complete  re- 
adjustment. At  the  inauguration  of  the  Foundation,  it  was  assumed  that  experience 
and  larger  knowledge  of  the  pension  question  would  in  the  future  make  changes  neces- 
sary. It  was  in  view  of  this  conviction  that  the  following  statement  was  incorporated 
among  the  rules  for  the  granting  of  retiring  allowances : 

"  The  Carnegie  Foundation  for  the  Advancement  of  Teaching  retains  the  power 
to  alter  these  rules  in  such  manner  as  experience  may  indicate  as  desirable  for 
the  benefit  of  the  whole  body  of  teachers."" 

It  goes  without  saying  that  the  trustees  will  meet  to  the  utmost  of  their  power 
the  expectations  created  by  the  present  rules  among  the  teachers  in  the  associated 


viii  INTRODUCTION 

institutions.  It  will  require  a  number  of  years  to  change  from  the  one  system  to  the 
other.  The  actuaries  have  suggested  that  men  below  the  age  of  forty-five  could  to 
their  own  advantage  transfer  from  one  system  to  the  other.  Whether  twenty  years  is 
a  reasonable  notification  of  a  change  in  the  rules  is  a  matter  which  will  be  considered 
in  the  most  serious  and  conscientious  manner  by  the  trustees. 

At  their  annual  meeting,  on  November  17,  1915,  the  trustees  received  and  dis- 
cussed this  report,  but  took  no  action  concerning  it  except  to  pass  the  following  reso- 
lution : 

Whereas,  The  benefit  of  the  present  pension  system  of  the  Carnegie  Foundation 
is  necessarily  confined  to  a  limited  number  of  institutions  and  does  not  furnish 
to  the  teachers  in  those  institutions  adequate  protection  for  themselves  and  their 
families;  and 

Whereas,  This  system  and  any  other  non-contributing  pension  system  involves 
constantly  growing  financial  burdens,  increasing  the  discrimination  between 
associated  and  non-associated  institutions,  and  creating  an  annual  charge  which 
may  ultimately  become  too  great  for  the  fund  to  bear, 

Resolved,  That  the  Board  of  Trustees  approve  the  efforts  of  the  president  to  de- 
vise a  contributory  pension  system  which  without  unfairness  to  the  just  expec- 
tations of  institutions  or  individuals  under  the  present  rules  shall  enable  the 
Foundation  to  expand  its  sphere  of  usefulness  and  ensure  its  permanent  ability 
to  meet  all  financial  obligations  expressed  or  implied; 

Further  Resolved,  That  the  Board  present  to  the  associated  institutions  for  their 
careful  consideration  a  report  of  the  President  of  the  Foundation  upon  a  com- 
prehensive pension  system,  to  be  applied  in  the  future,  with  the  request  that, 
if  they  deem  it  desirable,  they  submit  alternative  plans  or  suggestions ;  and  the 
Board  herewith  announce  that  whatever  plan  is  finally  adopted  will  be  devised 
with  scrupulous  regard  to  the  privileges  and  expectations  which  have  been 
created  under  existing  rules. 

In  compliance  with  this  request,  a  copy  of  this  paper  is  sent  to  each  trustee  and  to 
each  teacher  in  the  associated  institutions.  Any  suggestions  made  by  them  will  be  laid 
before  the  trustees  before  action  is  taken. 

It  remains  to  be  said  that  the  reform  of  the  Carnegie  Foundation  system  of  pen- 
sions, in  such  wise  as  to  make  it  available  to  the  general  body  of  college  teachers 
upon  a  broad  social  and  economic  basis,  has  far  greater  significance  than  the  protec- 
tion of  a  single  group  of  professional  workers,  important  as  this  object  is.  The  question 
of  pensions  has  become  in  the  last  ten  years  a  serious  social,  political,  and  economic 
question  in  Great  Britain,  the  United  States,  and  the  colonies  of  the  British  Empire. 
Civil  servants  are  seeking  for  pensions  at  the  hands  of  the  central  governments  or 
of  the  separate  states;  public  school  teachers  are  agitating  for  similar  favors.  Old  age 
pensions  for  all  needy  citizens  are  being  asked  in  many  quarters.  A  widespread  sen- 
timent has  been  created  that  thru  pension  legislation  something  can  be  had  for  noth- 
ing. The  trend  of  this  legislation  is  paternalistic  and  undemocratic,  and  in  most  cases 


INTRODUCTION  ix 

in  disregard  of  sound  economic  experience.  No  greater  service  can  be  accomplished  at 
this  time,  either  by  the  trustees  of  the  Foundation  or  by  the  teachers  in  American 
colleges,  than  to  set  forth  in  clear  and  simple  terms  a  conception  of  pension  adminis- 
tration which  is  just,  sound,  and  feasible,  and  which  appeals  to  the  sense  of  individ- 
ual responsibility  and  of  personal  independence.  Lavater's  dictum  that  he  who  reforms 
himself  does  most  to  reform  the  public  is  quite  as  true  of  associations  of  men  as 
of  individuals.  The  essential  question  is :  Are  the  fundamental  principles  set  forth  in 
the  following  report  those  upon  which  sound  pension  administration  and  legislation 
must  rest  ?  In  the  determination  of  this  question  the  trustees  ask  the  cooperation  of 
every  teacher  and  trustee  in  the  institutions  associated  with  the  Foundation. 

HeNEY  S.  PaiTCHETT. 


October,  1915. 


A  COMPREHENSIVE  PLAN  OF  INSURANCE  AND  ANNUITIES 
FOR  COLLEGE  TEACHERS 


TEN  YEARS  OF  ADMINISTRATION 

The  Carnegie  Foundation  for  the  Advancement  of  Teaching  completes  with  the 
present  year  the  first  decade  of  administration  of  the  gifts  of  Mr.  Andrew  Carnegie. 
In  the  Seventh  Annual  Report  I  have  described  in  detail  the  process  by  which  the 
trustees  of  the  Foundation  were  led  to  adopt  the  existing  system  of  pensions.  In  that 
report  were  mentioned  the  various  plans  which  at  the  beginning  were  considered  by 
the  Founder  and  by  the  trustees,  and  the  reasons  which  induced  the  trustees,  with  the 
consent  and  cooperation  of  the  Founder,  to  establish  a  pension  system  upon  generous 
terms  which  in  the  nature  of  the  case  could  be  extended  jto  only  a  limited  number  of 
American  colleges  and  universities. 

During  these  ten  years  the  trustees  have  followed  carefully  the  working  of  this 
system  of  pensions,  and  have  studied  the  pension  systems  of  the  world  and  their  liter- 
ature. Upon  the  actuarial  and  statistical  side  this  literature  is  abundant,  but  there 
is  little  in  it  to  throw  light  upon  the  large  fundamental  decisions  which  the  trustees 
wei-e  called  upon  to  make.  When  the  Foundation  was  inaugurated  even  the  actua- 
rial and  mortality  statistics  were  meagre.  Little  was  known  of  the  vital  statistics  of 
American  college  teachers.  The  effect  of  the  payment  of  pensions  from  the  gift  of 
a  single  donor  was  itself  a  new  question  in  university  administration.  In  their  effort 
to  administer  these  pensions  the  trustees  entered  a  field  of  university  legislation  and 
administration  for  which  there  were  no  precedents. 

At  the  inauguration  of  the  Foundation  the  attention  of  the  trustees  and  of  the 
Founder  was  focused  upon  the  aged  teacher.  His  service  and  his  need  called  for  some 
humane  and  just  method  of  dealing  with  the  teacher  whose  usefulness  had  decreased 
by  reason  of  old  age.  All  the  provisions  of  the  pension  rules  as  determined  by  the 
trustees  looked  toward  the  problem  of  the  worn-out  or  aged  teacher  and  his  depend- 
ents. Under  these  circumstances  the  effect  that  the  establishment  of  a  definite  system  of 
free  pensions  might  have  upon  younger  men  was  but  little  considered.  No  harm  is  done 
when  thru  private  philanthropy  or  by  means  of  a  college  endowment  the  old,  infirm 
teacher  is  provided  with  a  competence  during  his  declining  years.  It  is,  however,  not 
so  clear  what  the  effect  will  be  upon  the  man  of  twenty-five  or  thirty  or  thirty-five 
in  holding  out  to  him  this  expectation  throughout  his  teaching  career.  To  such  a  man 
the  protection  of  a  pension  system  as  at  present  inaugurated  is  postponed  to  the  dis- 
tant future.  The  majority  of  these  younger  men  will  never  enter  into  the  possession 
of  a  pension,  but  the  promise  of  it  during  thirty  or  forty  years  of  their  academic  life 
will  affect  their  relations  in  ways  not  so  evident  ten  years  ago. 

Mr.  Carnegie,  in  the  founding  of  the  five  institutions  which  bear  his  name,  made 
two  provisions  which  involved  a  long  look  into  the  future. 

In  the  first  place  he  left  with  the  boards  of  trustees  of  these  institutions  the  widest 
discretion  in  determining  the  function  and  work  of  their  respective  foundations.  They 


4         INSURANCE  AND  ANNUITIES  FOR  COLLEGE  TEACHERS 

have  not  only  the  power  but  the  obligation  to  change  completely  the  application  of 
their  endowments  if  in  time  such  changes  seem  justified. 

In  addition  he  created  a  great  trust  fund, — the  Carnegie  Corporation, — a  major- 
ity of  whose  trustees  are  the  heads  of  these  five  earlier  institutions.  By  his  direction 
the  very  large  income  of  this  fund  is  to  be  used  first  for  the  proper  and  reasonable 
development  of  the  institutions  that  he  has  founded,  and  secondly  to  aid  those 
causes  which  in  the  judgment  of  the  tinistees  make  for  the  upbuilding  of  men  in  our 
nation. 

These  provisions  impose  upon  the  trustees  and  heads  of  the  five  institutions  ex- 
traordinary duties  and  responsibilities.  They  are  under  the  highest  obligations  to 
scrutinize  the  policies  of  their  respective  institutions,  and  to  seek  to  adapt  them  to 
the  new  conditions  and  to  the  results  that  time  and  experience  may  confirm.  The 
freedom  of  action  accorded  to  them  by  the  Founder  and  his  generous  financial  pro- 
vision for  their  future  appeal  no  less  to  their  sense  of  honor  than  to  their  sense  of 
responsibility. 

The  decade  of  administration  just  completed  by  the  Carnegie  Foundation  has  been 
rich  in  experience.  It  has  been  a  period  of  unexampled  activity  in  the  creation  of 
pension  systems  on  the  part  of  institutions  of  learning,  of  the  great  industries,  and 
of  the  states  themselves.  To-day  more  than  ever  before  there  is  needed  a  clear  exposi- 
tion of  the  fundamental  social  and  economic  principles  upon  which  pension  systems 
ought  to  rest.  I  apprehend,  therefore,  that  at  this  time  the  trustees  of  the  Foundation 
can  do  no  greater  service  than  to  reexamine  their  own  system  of  pensions  and  to  meet 
frankly  any  weaknesses  which  may  exist. 

I  have  sought,  therefore,  in  the  following  report  to  deal  with  the  question  of  pen- 
sions in  such  way  as  to  make  clear  the  fundamental  principles  involved,  and  then  to 
apply  these  to  the  consideration  of  pensions  for  college  teachers.  Logically  the  dis- 
cussion falls  under  the  following  heads,  altho  for  the  convenience  of  presentation  a 
formal  division  of  the  sections  has  not  been  made: 

I.  The  Philosophy  of  the  Pension  System. 
II.  The  Cost  of  the  Pension  System. 

III.  The  Responsibility  for  the  Pension  System. 

IV.  A  Cooperative  System  of  Insurance  and  Pensions. 
V.  The  Existing  System  of  the  Carnegie  Foundation. 

The  report  represents  long  study  and  the  counsel  of  those  best  qualified  to  advise. 
For  the  sake  of  brevity  and  clearness  only  such  statistical  tables  are  introduced  as 
seem  indispensable,  and  references  to  the  literature  ai*e  for  similar  reasons  infrequent. 


PENSIONS  AND  ANNUITIES 

Ik  the  literature  of  insurance,  annuities,  and  pensions  no  clear  distinction  is  made 
between  a  pension  and  an  annuity.  Pension  is  used  to  describe  an  annual  payment 
made  to  an  individual,  whether  secured  thru  his  cooperation  or  as  a  free  gift.  The 
word  annuity  in  insurance  publications  refers  generally  to  an  annual  payment  made  to 
an  individual  from  moneys*contributed  by  himself.  Ordinarily  these  annuities  are  of 
two  kinds.  For  example,  an  individual  at  the  age  of  thirty  may  go  to  an  insurance 
company  with,  say,  $10,000,  and  purchase  outright  an  annuity  to  begin  at  once  and 
continue  until  his  death ;  or  he  may,  beginning  at  the  age  of  thirty,  pay  a  sum  each 
year  until  some  later  age  such  as  sixty-five,  after  which  time  the  company  guarantees 
him  a  fixed  annuity  throughout  his  remaining  years.  The  latter  form  is  spoken  of  as 
a  deferi-ed  annuity. 

The  word  pension  in  the  exact  sense  applies  to  a  payment  made  to  an  individual 
without  his  cooperation.  In  the  first  edition  of  his  famous  Dictionary  of  the  Eng- 
lish Language  Dr.  Johnson  defined  a  pension  as  "an  allowance  made  to  anyone  with- 
out an  equivalent.  In  England  it  is  generally  understood  to  mean  pay  given  to  a  state 
hireling  for  treason  to  his  country."  "Pensioner"  he  defines  as  "one  who  is  supported 
by  an  allowance  paid  at  the  will  of  another;  a  dependant."  These  definitions  were  the 
source  of  no  small  emban*assment  to  the  good  doctor  himself  a  few  years  later  when, 
upon  the  solicitation  of  friends,  George  III  conferred  upon  him  an  annual  pension 
of  three  hundred  pounds.  After  some  hesitation  Dr.  Johnson  accepted  the  pension 
and  lived  contentedly  upon  it  to  the  end  of  his  life,  altho  his  critics  never  ceased  to 
insist  that  his  political  views  had  been  warped  by  its  acceptance.  These  definitions 
reflect,  no  doubt,  somewhat  of  the  prejudice  of  the  great  scholar,  but  they  reflect 
also  a  general  attitude  of  mind  long  since  obsolete  on  the  continent  of  Europe,  but 
still  common  in  America  and  in  England,  which  looks  askance  upon  the  acceptance 
of  a  pension,  both  on  account  of  the  implied  dependence  and  also  on  account  of 
the  possible  effect  such  acceptance  may  have  upon  the  opinions  of  the  beneficiary. 
It  was  partly  in  view  of  this  feeling  that  the  pensions  of  the  Carnegie  Foundation 
have  been  denominated  retiring  allowances.  They  are,  of  course,  pensions  in  the  true 
sense. 

The  term  annuity  may  with  propriety  be  applied  to  any  sum  annually  paid  to  an 
individual,  whether  from  the  proceeds  of  his  own  payments  or  from  some  other  source, 
but  in  insurance  contracts  annuities  usually  refer  to  annual  incomes  secured  by  the 
payments  of  the  beneficiaries  themselves  in  one  of  the  two  ways  already  referred  to. 

When,  however,  one  comes  to  consider  the  various  plans  under  which  pensions  and 
annuities  are  paid,  sometimes  in  combination  with  each  other,  one  finds  such  pay- 
ments referred  to  almost  universally  as  pensions.  Thus  the  old  age  pensions  insti- 
tuted in  recent  years  by  the  English  government  are  paid  entirely  by  the  govern- 
ment and  are  pensions  pure  and  simple.  The  annuities  paid  to  industrial  workers  in 


6         INSURANCE  AND  ANNUITIES  FOR  COLLEGE  TEACHERS 

Germany,  affecting  nearly  one-third  of  the  entire  population,  are  made  up  of  de- 
ferred annuities  paid  for  by  the  worker  himself  thru  annual  contributions  extending 
over  a  long  term  of  years,  of  similar  payments  from  his  employer  extending  over  an 
equal  period  of  time,  and  of  a  third  contribution  from  the  government.  Such  a  sys- 
tem is  made  up  in  part  of  a  pension  and  in  part  of  an  annuity.  So  universal,  how- 
ever, has  been  the  use  of  the  term  pension  that  both  plans  are  referred  to  as  pension 
systems. 

For  the  sake  of  clearness  it  would  be  helpful  to  use  the  words  pension  and  annuity 
as  distinctive  terms,  but  the  effort  involves  such  a  divergence  from  ordinary  usage  ' 
that  it  seems  wiser  for  the  moment  to  use  the  term  pension  in  defining  a  system  of 
annuities,  even  tho  the  pension  so  referred  to  is  made  up  in  part  of  an  annuity  paid 
for  by  the  individual.  Toward  the  end  of  this  paper  I  have  described  a  combination 
of  insurance  and  annuity  which  differs  from  the  pension  systems  now  in  use,  but  for 
the  present  the  term  pension  system  will  be  used  to  describe  both  those  pensions 
which  are  paid  with  the  cooperation  of  the  beneficiary  and  those  which  are  paid 
without  it.  The  details  of  each  system  will  make  clear  whether  it  is  a  true  pension 
system  or  not. 

The  Origin  of  Pension  Systems 

The  personal  pension  is  an  ancient  institution.  The  pension  system  is  distinctly 
modem. 

The  history  of  the  pension  as  a  reward  for  public  service  goes  back  to  the  Roman 
Empire.  At  that  period  and  for  many  centuries  thereafter  the  pension  existed  as  the 
gift  of  a  sovereign  to  a  subject  for  distinguished  military  service.  As  time  went  on 
the  sovereign  used  his  prerogative  to  reward  distinguished  achievement  in  other  fields 
of  endeavor,  in  literature,  in  art,  in  philanthropy,  but  the  pension  always  remained 
the  free  gift  of  a  sovereign  or  of  a  government  to  an  individual. 

In  contrast  with  the  personal  pension,  systems  of  pensions  for  the  old  and  the 
disabled  or  for  special  groups  of  the  body  politic  are  recent.  They  have  arisen  pri- 
marily out  of  the  social  readjustment  consequent  upon  industrial  revolution,  in  part 
out  of  a  gradually  developing  social  conscience.  LTntil  the  beginning  of  the  nine- 
teenth century  the  industrial  worker  lived  in  a  paternal  relation  to  his  employer. 
The  latter  acknowledged  an  obligation  to  provide  for  his  employee  in  sickness  and 
in  old  age.  The  revolution  in  industry  which  came  at  the  beginning  of  that  century 
changed  this  situation.  The  worker  was  thrown  upon  his  own  resources.  He  no  longer 
lived  in  close  touch  with  his  employer,  but  in  large  groups  gathered  about  industrial 
centres.  Communities  were  transformed  from  agricultural  to  manufacturing  modes 
of  life.  This  transformation  left  the  mass  of  industrial  workers  to  face  in  old  age 
acute  poverty  and  want  unless  some  organized  effort  was  made  to  meet  it.^  The 
pension  system  arose  from  this  situation.  Practically  all  European  countries  have 

*  Massachusetts  Report  on  Old  Age  Pensions,  Annuities,  and  Insurance,  Boston,  1914. 


THE  ORIGIN  OF  PENSION  SYSTEMS  7 

inaugurated  such  systems  as  a  defence  for  working-men  against  want  in  old  age  and 
against  invalidity.  In  this  field  Germany  has  led  the  way.  Her  pension  legislation 
and  the  administration  of  the  industrial  pension  system  of  that  country,  which 
affects  many  millions  of  people,  constitute  to-day  the  most  complete  and  success- 
ful effort  to  deal  with  those  risks  of  industrial  workers  which  arise  out  of  old  age 
and  loss  of  income-earning  power.  The  expense  of  the  industrial  pension  system  falls 
jointly  upon  the  employer,  the  employee,  and  the  government,  but  the  administra- 
tion lies  wholly  in  the  hands  of  the  government.  Insurance  is  obligatory  upon  labor- 
ers, journeymen,  assistants,  domestic  servants,  and  industrial  workers  generally.  Par- 
ticipation begins  with  the  seventeenth  year,  and  starting  at  this  early  age,  a  very 
small  payment  on  the  part  of  both  employer  and  employee  results  during  the  normal 
life  of  the  individual  in  a  satisfactory  protection,  and  imposes  at  the  same  time  no 
unreasonable  burden  upon  either  the  worker  or  the  industry. 

While  this  movement  for  pensions  and  insurance  for  industrial  workers  has  arisen 
mainly  out  of  the  changed  social  and  industrial  conditions  of  the  last  hundred  years, 
it  is  also  true  that  governments  have  been  influenced  to  participate  in  the  move- 
ment by  the  desire  to  diminish  pauperism  and  the  financial  burden  that  pauperism 
brings.^  Whether  this  result  has  been  achieved  remains  as  yet  undecided.  Professor 
Henry  W.  Farnam,  who  has  made  a  close  examination  of  the  question,  expresses 
doubt  as  to  whether  the  institution  of  industrial  pensions  has  made  itself  felt  by 
a  diminution  in  the  relief  of  the  poor,  but  he  mentions  at  the  same  time  many  con- 
tributing facts  which  may  affect  the  result.^ 

Pension  systems  for  governmental  employees  were  almost  coincident  with  the  rise 
of  industrial  pensions.  They  began  with  systems  of  pensions  for  military  officers  about 
the  beginning  of  the  last  century.  The  earliest  civil  pension  system  in  existence  is 
that  for  the  municipal  employees  of  Paris.  The  English  civil  service  pension  dates 
from  1810. 

The  pension  of  military  officers  as  a  class  was  defended  upon  the  ground  of  the  risk 
which  these  servants  of  the  government  were  forced  to  take,  but  it  was  an  easy  step 
to  the  pensioning  of  civil  servants.  Teachers'  pensions  in  European  countries  thus 
came  in  among  those  of  other  civil  servants,  teachers  being,  whether  in  schools  or 
universities,  civil  employees  of  the  various  governments. 

In  the  German  states  and  municipalities  pensions  for  civil  servants,  including  teach- 
ers, differ  from  the  pensions  maintained  for  industrial  workers  in  this  fundamental 
fact,  they  are  pure  pensions  being  paid  entirely  by  the  government. 

The  reasons  which  brought  about  the  adoption  of  the  free  pension  system  were 
partly  political  and  partly  due  to  a  lack  of  knowledge  of  the  ultimate  losid. 

A  pension  system  paid  for  by  a  government  was  politically  popular.  Every  civil 
servant  could  be  trusted  to  be  enthusiastic  for  a  pension  which  apparently  cost  him 
nothing.  Social  considerations  made  it  desirable  to  maintain  certain  classes,  such  as 

*  The  recent  English  legrislation  is  almost  entirely  of  this  character.  *  Yale  Review,  1906. 


8         INSURANCE  AND  ANNUITIES  FOR  COLLEGE  TEACHERS 

teachers,  in  old  age  in  a  fitting  manner.  Perhaps  most  influential  of  all  was  the  fact 
that  the  free  pension  system  cost  but  a  small  sum  at  the  beginning  and  the  ultimate 
load  involved  was  not  appreciated. 

It  was  argued  that  the  payment  of  a  modest  pension,  which  would  be  claimed  in  the 
end  by  only  the  minority  that  survived  long  service,  would  take  the  place  of  a  very 
considerable  increase  in  the  rate  of  pay,  and  that  in  the  long  run  it  would  be  cheaper 
for  the  employer,  in  this  case  the  government,  than  a  contributory  system  with  higher 
pay. 

The  argument  is  sound  as  far  as  it  goes.  If  salaries  had  been  depressed  25  or  30  per 
cent,  and  if  the  government  had  anticipated  the  pension  payments  by  setting  aside 
from  year  to  year  the  necessary  reserves,  the  ultimate  load  might  have  been  kept 
within  a  reasonable  limit.  The  actual  result  has  been  disappointment  both  on  the 
part  of  the  beneficiaries  of  the  free  system  and  of  those  who  paid  for  the  pensions. 
Salaries  are  undoubtedly  lowered  in  the  course  of  time  by  a  free  pension  system,  but 
not  to  such  an  extent  as  to  prevent  the  pension  load  from  becoming  an  enormous 
burden.  Thus,  in  Berlin  in  1914  the  pay-roll  of  the  civil  service,  excluding  the  police, 
cost  $3,094,000,  while  the  cost  of  the  pension  roll  amounted  to  $1,142,400  or  36.92 
per  cent  of  the  pay  of  the  active  list.  In  England  the  cost  of  the  pension  system  had 
increased  to  approximately  30  per  cent  in  the  Treasury  and  subordinate  departments 
in  1903.  The  steady  growth  of  the  pension  load  coming  in  a  municipality  or  a  state 
is  illustrated  by  the  history  of  the  pensions  of  the  London  Metropolitan  Police  as 
shown  in  the  following  table : 


Year 

Pay-Boll 

PenaUmEon 

Percentage  ratio  of 
Pension  Roll  to  Pay  Roll 

1844 

$1,319,499 

$10,837 

0.8 

1854 

1,638,199 

139,841 

8.5 

1890 

5,842,988 

984,592 

16.8 

1915 

10,060,914 

2,946,919 

29.3 

In  France  in  1912  the  Pension  Roll  of  the  National  Civil  Service  cost  17  per  cent 
of  the  pay  of  those  on  the  active  list,  and  in  Austria  in  the  same  year  the  pension 
cost  for  the  civil  list  was  33  per  cent  of  the  cost  of  the  pay  of  the  active  list. 

The  essential  facts  to  which  the  pension  experiences  of  different  nations  seem  to 
point  are  these.  Any  employer,  whether  a  government  or  a  corporation,  that  un- 
dertakes to  carry  the  liabilities  which  accrue  under  a  system  of  non-contributory  pen- 
sions will  in  the  end  find  the  load  intolerable.  Employees,  on  the  other  hand,  will  be 
disappointed  both  by  the  diminution  in  the  rates  of  pay  and  the  uncertainty  as  to 
the  payment  of  the  pension  which  is  likely  to  arise  in  the  course  of  time.  The  truth 
of  these  lessons  of  experience  is  not  always  easy  to  prove  to  either  governments, 
corporations,  or  employees.  Our  American  states  and  municipalities  are  repeating  the 
process  thru  which  European  states  have  gone.  Legislation  establishing  pension  sys- 
tems both  by  states  and  municipalities  is  being  enacted  with  the  enthusiastic  support 


THE  SOCIAL  PHILOSOPHY  OF  THE  PENSION  SYSTEM  9 

of  teachers,  but  without  a  full  understanding  on  the  part  of  the  teacher  as  to  where 
his  true  interest  lies  and  without  any  conception  on  the  part  of  states  and  munici- 
palities of  the  load  which  is  assumed. 

The  free  pension  system  lays  upon  the  budget  of  the  city  or  state  a  load  it  is  unable 
to  bear,  it  tends  to  depress  the  rate  of  pay  of  employees,  and  proves  in  the  end  a  disap- 
pointment both  to  the  beneficiaries  of  the  system  and  to  those  who  maintain  it. 

There  is  no  justification  for  making  so  fundamental  a  discrimination  between  in- 
dustrial pension  systems  and  those  for  Civil  Service  employees  or  professional  men 
on  fixed  pay  as  is  involved  in  making  the  one  contributory  and  the  other  free.  The 
fundamental  principles  underlying  all  pension  systems  are  the  same. 

It  should  be  added  that  in  the  European  countries  outside  of  Germany  the  contrib- 
utory pension  system  has  been  adopted,  but  with  many  variations;  and  in  a  number 
of  cases  the  contributions  of  individuals  and  of  the  government  have  been  assumed 
without  complete  actuarial  study.  In  the  Civil  Service  of  France  employees  contribute 
about  one  third  of  the  pension  cost,  in  Austria,  about  one  tenth.  In  both  countries 
the  pension  load  has  become  a  serious  burden. 


The  Social  Philosophy  of  the  Pension  System 

The  literature  dealing  with  these  pension  systems  is  extensive,  but  it  is  devoted 
almost  exclusively  either  to  a  description  of  the  systems  themselves  or  to  a  considera- 
tion of  the  actuarial  and  financial  problems  that  are  involved.  In  all  cases  it  is  assumed 
that  pensions  are  desirable  and  are  in  the  interest  of  the  class  or  social  group  for 
which  they  have  been  planned,  provided  the  pension  system  adopted  is  financially 
sound. 

For  this  reason  those  who  seek  to  deal  with  the  problems  of  pensions  in  a  demo- 
cracy like  the  United  States  gain  scant  help  from  this  large  mass  of  literature,  for 
back  of  these  actuarial  and  financial  questions  lie  others  still  more  fundamental  which 
concern  themselves  with  the  inherent  wisdom  and  fairness  of  the  pension  system  itself. 
Such  an  enquirer  desires  to  be  assured  that  a  pension  system  will  do  good  rather  than 
harm,  and  to  ascertain  whether  the  pensioning  of  a  particular  class  or  group  tends 
to  demoralize  or  to  stimulate.  Upon  such  questions  this  mass  of  pension  literature 
throws  little  light.  Before  one  undertakes  actuarial  and  financial  computations,  how- 
ever, before  he  makes  the  assumptions  upon  which  his  pensions  are  to  be  predicated 
and  frames  the  rules  on  which  they  are  to  be  conferred,  these  questions  must  be  met 
in  one  form  or  another. 

The  answer  which  has  been  given  to  them  in  Europe  is  the  outcome  of  the  social 
philosophy  of  the  last  hundred  years,  a  social  philosophy  under  which  the  governments 
of  these  countries  exercise  a  paternal  supervision  quite  beyond  that  to  which  Ameri- 
cans are  accustomed,  but  toward  which  they  have  been  rapidly  tending  in  the  last 
twenty  years.  • 


10       INSURANCE  AND  ANNUITIES  FOR  COLLEGE  TEACHERS 

This  social  philosophy  has  already  been  briefly  refen-ed  to.  Those  who  inaugurated 
pension  systems  reasoned  in  some  such  way  as  this:  The  old-time  relation  between 
employer  and  employed  is  gone.  The  modern  industrial  worker  is  a  member  of  a  great 
group  of  working-men  employed  by  a  manufacturing  company  or  agency.  When  such 
a  workman  falls  ill,  or  when  he  becomes  too  old  for  service,  he  has  no  personal  relation 
with  the  employer  which  enables  him  to  claim  protection  or  relief.  It  is  clearly  against 
the  interest  of  the  social  order  that  these  workers  who  have  developed  and  maintained 
the  industries  of  the  country  should  find  themselves  helpless  in  illness  and  in  old  age. 
Therefore,  a  regime  must  be  devised  under  which  such  relief  may  be  within  their  grasp. 
The  proposers  of  this  solution  argued  that  the  responsibility  for  such  an  arrangement 
lay  first  of  all  with  the  workman  himself,  secondly  with  the  employer,  and  in  the  third 
place  with  the  general  public  as  represented  by  the  government.  The  workman  was 
directly  interested ;  the  employer  was  quite  as  directly  interested  on  the  ground  of 
economic  efficiency;  the  general  public  was  not  only  interested  from  the  standpoint 
of  the  relief  of  the  poor,  but  indirectly  interested  in  the  happiness  and  well-being  of 
the  body  of  industrial  workers.  Out  of  some  such  philosophy  as  this  was  conceived 
the  industrial  pension  system  of  countries  like  Germany.  It  was  the  logical  outcome 
of  that  philosophy  of  social  justice  which  looks  to  the  state  as  the  agency  which  has 
not  only  to  plan  but  to  administer  social  relief.  In  European  countries  those  charged 
with  the  administration  of  the  state  not  only  had  the  duty  of  devising,  but  they  also 
had  the  power  to  organize  the  system  of  relief  and  to  make  it  compulsory  upon  worker 
and  employer.  It  should  be  added  that  as  a  matter  of  practical  administration,  such 
a  system  of  relief  is  rendered  easy  by  the  fact  that  the  workers  of  the  various  industries 
are  generally  gathered  in  large  groups  which  form  convenient  units  of  the  pension 
system.  It  is  thus  easy  to  group  all  employers  and  employees  in  a  given  industry  into 
a  feasible  pension  system,  and  one  which  still  enables  the  worker  in  any  industry  to 
pass  freely  from  one  employer  to  another. 

The  non -contributory  pensions  of  the  German  states  and  municipalities  can  scarcely 
be  invoked  as  justification  for  similar  pensions  for  college  teachers  in  a  country  like 
the  United  States.  College  teachei*s  belong  to  a  learned  profession,  not  to  a  trade, 
and  while  the  pay  which  they  receive  is  upon  a  modest  scale,  it  nevertheless  places 
the  teacher  quite  beyond  that  danger  line  of  want  which  hangs  continually  over 
the  industrial  worker.  The  typical  salary  of  the  college  teacher  in  the  institutions 
associated  with  the  Foundation^  is  at  the  age  of  thirty-four  $1800,  at  thirty -eight 
$2200,  at  forty  $2500,  at  forty-five  $2850,  at  forty-nine  $3200,  and  reaches  a  max- 
imum of  approximately  $3300  at  fifty-three.  This  scale,  while  moderate,  compares 
nevertheless  favorably  with  the  typical  income  of  the  physician,  of  the  engineer,  and  of 
the  lawyer.  True,  there  are  no  great  financial  prizes  in  teaching  as  there  are  in  medicine, 
in  engineering,  and  in  law,  but  on  the  average  the  college  teacher  is  paid  as  highly 
as  are  the  members  of  other  professions.  No  argument  based  on  the  narrow  margin 

^  Eighth  Annual  Report  of  the  Carnegie  Foundation,  page  106. 


PENSION  SYSTEM  FOR  COLLEGE  TEACHERS  JUSTIFIED?      11 

between  comfort  and  poverty,  such  as  is  advanced  in  the  case  of  the  industrial  worker, 
can  be  put  forward  in  the  case  of  the  college  teacher  to  justify  a  free  pension  for  him. 

It  is  clear  also  that  the  question  of  the  justice  and  the  desirability  of  the  pension 
for  the  college  professor  is  somewhat  different  from  that  which  arises  in  the  case  of 
the  public  school  teacher.  These  latter  receive  salaries  which  in  many  cases  approxi- 
mate day  wages.  Thus  the  Foundation's  recent  study  of  education  in  Vermont  found 
the  representative  rural  school  teacher  receiving  "wages"  of  between  $8  and  S9  a  week, 
and  this  only  during  the  school  term.  The  margin  between  comfort  and  want  in  such 
a  case  is  so  small  that  a  claim  for  a  pension  on  the  ground  of  insufficient  pay  has  more 
justification.  Furthermore  these  teachers  are  civil  employees  of  their  respective  states, 
and  they  may  be  considered  by  the  state  from  this  point  of  view. 

Before  a  social  philosophy  can  justify  college  pensions  it  is  necessary  to  answer 
questions  like  these :  Will  a  system  of  pensions  in  American  colleges  and  universi- 
ties serve  the  financial,  intellectual,  and  social  interests  of  the  teachers  themselves  ? 
Will  it  serve  education  in  the  larger  sense.?  If  such  pensions  are  justified,  upon  whom 
does  the  obligation  for  their  payment  rest  ?  What  form  of  pension  can  be  devised 
which  is  at  once  feasible  and  just  ?  These  questions  are  fundamental.  They  precede 
any  actuarial  or  financial  computations. 

For  the  trustees  of  the  Carnegie  Foundation,  after  answering  these  questions  there 
stiU  remains  another  of  large  import  and  involving  a  weighty  responsibility.  Con- 
sidering not  alone  the  present,  but  the  future,  and  having  in  view  the  interests  not 
only  of  the  five  thousand  teachers  in  the  institutions  now  associated  with  the  Foun- 
dation, but  the  interests  of  the  whole  body  of  college  teachers,  how  can  the  Carnegie 
Foundation  most  wisely  use  its  endowment  in  the  development  of  a  pension  and  re- 
lief system  which  may  serve  the  great  body  of  college  teachers ;  a  system  which  may 
increase  their  independence,  not  diminish  it;  which  shall  make  for  individual  sense 
of  responsibility,  not  against  it;  which  shall  promote  migration  from  one  college  to 
another,  not  restrict  it;  which  shall  give  genuine  security  to  the  college  teacher,  but 
without  the  sense  of  obligation ;  and  finally,  which  shall  give  the  college  teacher  him- 
self participation  in  the  management  of  the  pension  system  ?  The  answers  to  these 
questions  are  clearer  to-day  than  they  were  ten  years  ago.  j 


Is  A  Pension  System  foe  College  Teachers  Justified? 

In  the  preceding  section  I  have  pointed  out  that  the  industrial  pensions  of  Euro- 
pean nations  are  based  upon  a  definite  social  philosophy.  These  pension  systems — and 
I  use  the  word  pension  to  include  all  those  forms  of  protection  afforded  by  insurance 
and  annuities — are  contributory  and  compulsory.  I  have  called  attention  in  the  second 
place  to  the  fact  that  European  governments  have  provided  for  their  civil  servants, 
including  teachers,  free  pensions,  and  that  they  have  taken  this  action  from  the  stand- 
point of  employers,  and  mainly  upon  economic  grounds.  The  pension  system  furnishes 


12       INSURANCE  AND  ANNUITIES  FOR  COLLEGE  TEACHERS 

a  satisfactory  means  of  removing  old  and  faithful  servants,  and  hence  makes  for  the 
good  of  the  service.  It  is  an  economical  measure  because  the  expense  is  in  the  long  run 
paid  by  the  employed. 

In  America,  so  far  as  we  have  dealt  with  pension  systems  for  teachers,  we  have  gen- 
erally transferred  the  German  plan  of  free  pensions  without,  however,  seeking  to 
enquire  closely  whether  it  rests  upon  a  social  philosophy  which  fits  our  democracy. 
Are  such  pensions  justifiable  for  American  college  teachers? 

To  an  agency  which  for  ten  years  has  been  engaged  in  paying  pensions  to  college 
teachers  this  may  seem  a  late  day  to  raise  this  question.  Those  who  have  acquainted 
themselves  with  the  charter  of  the  Foundation,  and  who  are  familiar  with  its  history, 
know  that  it  has  been  the  practice,  as  it  has  been  the  duty,  of  the  trustees  to  raise 
such  questions  constantly  until  what  is  believed  to  be  a  final  and  satisfactory  solution 
has  been  reached.  At  the  inauguration  of  the  Foundation  but  little  knowledge  was 
available  concerning  pension  systems.  None  are  better  aware  of  this  ignorance  than 
the  executive  officers  who  were  more  directly  responsible.  The  trustees  had  received 
an  endowment  with  which  to  pay  pensions  to  teachers,  and  they  forthwith  proceeded 
to  pay  them  in  such  manner  as  seemed  to  them  wise  on  the  basis  of  the  information 
and  experience  then  available.  The  Founder  himself,  realizing  the  difficulties  that  were 
involved  and  the  possible  necessity  for  change  in  the  future,  left  within  the  discre- 
tion of  the  tinistees  the  power  to  change  even  the  object  of  the  Foundation,  if  in  their 
judgment  experience  proved  such  a  change  to  be  desirable.  By  a  two-thirds  vote  the 
trustees  could,  after  discharging  the  obligations  already  assumed,  discontinue  pen- 
sions altogether  in  the  future,  if  in  their  judgment  the  payment  of  such  pensions  was 
productive  of  harm  rather  than  of  good. 

The  experience  of  ten  years,  however,  has  developed  nothing  to  change  the  opin- 
ions of  the  Founder  and  the  trustees  that  some  form  of  pension  relief  for  college 
teachers  is  not  only  justified  on  the  ground  of  educational  progress,  but  that  some 
such  plan  is  demanded  from  the  standpoint  of  a  just  and  humane  social  philosophy. 
The  reasons  for  this  opinion  would  be  stated  to-day  somewhat  differently  than  ten 
years  ago. 

It  will  clear  the  ground  somewhat  for  these  reasons  if  two  misconceptions  which 
have  confused  the  discussion  of  this  matter  are  first  removed. 

In  the  United  States  free  pensions  for  college  teachers  have  been  widely  urged  upon 
the  basis  of  the  altinaistic  character  of  the  teacher's  profession  and  upon  the  plea  of 
poverty.  Neither  of  these  furnishes  a  sound  reason.  It  is  true  that  the  altruistic  mo- 
tive is  strong  among  teachers.  It  is  equally  strong — perhaps  stronger — among  phy- 
sicians. But  this  fact  constitutes  no  claim  for  subsidizing  either  of  these  professions. 
The  world  does  not  owe  a  subsidy  to  any  man  or  to  any  profession  on  the  ground  of 
altruistic  intentions. 

Moreover,  the  claim  constantly  put  forward  that  altruism  is  a  determining  motive 
in  bringing  men  into  the  calling  of  the  teacher  is  misleading.  Men  become  teachers 


PENSION  SYSTEM  FOR  COLLEGE  TEACHERS  JUSTIFIED?       13 

from  the  same  motives  that  lead  others  to  become  physicians,  engineers,  and  lawyers. 
The  opportunity  of  the  moment  determines  many.  Others  are  influenced  by  personal 
liking  for  study  and  books.  With  a  large  number  financial  considerations  have  weight 
in  drawing  them  into  college  places.  This  may  seem  a  paradox,  but  it  is  thoroughly 
understood  by  all  who  are  in  close  touch  with  the  teaching  profession.  A  large  pro- 
portion of  the  students  in  colleges  come  from  families  whose  means  are  restricted,  and 
who  live  simply  and  economically.  These  are  exactly  the  students  most  likely  to  work 
seriously.  Many  of  them  have  good  minds,  and  they  come  to  the  end  of  their  college 
course  interested  in  study  and  in  college  life  and  affairs.  From  them  come  the  great 
number  of  graduate  students.  When  they  face  the  problem  of  earning  a  livelihood, 
they  are  confronted  by  the  fact  that  the  $1200  or  $1500  a  year  to  be  had  as  an  in- 
structor is  far  more  pay  than  they  can  begin  with  in  any  other  field.  Furthermore,  it 
gives  better  promise  of  continuity. 

A  large  proportion  of  these  men  are  already  engaged  to  their  future  wives  and  look 
forward  to  an  early  marriage.  The  man  who  has  a  sweetheart  waiting  to  become  a 
wife  is  almost  sure  to  prefer  the  security  of  the  present  to  the  larger  promise  of  the 
future.  Teachers  are  altruistic  in  the  choice  of  their  profession  only  in  the  same  sense 
that  high-minded  physicians,  lawyers,  and  business  men  are  altruistic. 

In  the  second  place  free  pensions  for  college  teachers  cannot  "he  invoked  on  the 
plea  of  poverty.  True,  college  salaries  are  modest,  but  so,  on  the  average,  are  the  in- 
comes of  physicians,  lawyers,  and  engineers.  The  salary  received  by  the  teacher  re- 
moves him  from  that  danger  of  extreme  want  which  lies  athwart  the  path  of  the  day 
laborer.  If  the  teacher  has  health  and  ability,  the  protection  of  his  wife,  of  his  children, 
and  of  himself  against  the  hazards  of  life  is  mainly  a  function  of  his  own  self-control, 
foresight,  and  thrift.  There  are  no  great  money  prizes  in  his  calling  and  some  of  the 
ablest  men  are  greatly  underpaid;  but  many  also  are  overpaid,  and  the  majority 
earn  incomes  as  large  as  they  could  command  in  any  other  field.  There  is  no  reason  for 
pensioning  teachers  either  on  the  ground  of  altruistic  service  or  of  inadequate  pay 
which  would  not  hold  for  physicians,  engineers,  lawyers,  and  preachers.  The  reasons 
which  justify  some  organized  pension  system  to  meet  the  hazards  of  the  lives  of 
teachers  are  partly  economic  and  partly  the  outcome  of  a  gradually  developing  social 
conscience. 

A  sound  economic  reason  that  justifies  pensions  for  college  teachers  lies  in  the 
fact  that  the  provision  of  a  pension  offers  the  only  humane  and  feasible  method  by 
which  worn-out  and  aged  teachers  may  be  removed  from  the  service.  Experience  has 
shown  that  neither  governments  nor  colleges  will  dismiss  faithful  servants  who  be- 
come incapacitated  in  cases  where  they  possess  no  resources  to  fall  back  upon.  In  such 
cases  there  is  a  direct  conflict  between  the  social  conscience  and  sound  administration. 
The  tendency  is  to  sacrifice  the  students  to  save  the  teacher.  Perhaps  in  no  other 
field  does  the  worn-out  or  inefficient  worker  do  more  harm  than  in  the  school  or  in 
the  college.  A  pension  system  makes  for  greater  efficiency,  whether  the  organization 


14       INSURANCE  AND  ANNUITIES  FOR  COLLEGE  TEACHERS 

be  industrial  or  educational,  and  thus  furnishes  a  sound  economic  reason  for  its  insti- 
tution. 

An  additional  economic  reason  is  that  college  teachers,  unlike  physicians,  lawyers, 
and  engineers,  are  employees  on  fixed  salaries.  They  are  gathered  in  groups  whose 
work  and  scale  of  pay  are  comparable.  The  organization  of  teachers  into  some  form 
of  association  for  their  common  protection  is,  therefore,  feasible,  as  it  is  not  feasible 
for  doctors,  lawyers,  and  engineers.  This  economic  reason  has  far  greater  significance 
than  is  ordinarily  understood.  It  is  impossible  to  organize  a  pension  system  among 
any  social  group  unless  its  members  are  living  and  working  under  conditions  that 
approach  some  degree  of  uniformity.  Experience  has  shown  again  and  again  that  in- 
dividualistic pension  systems — that  is,  systems  for  relief  addressed  to  the  individual 
alone — result  in  bringing  relief  only  to  those  who  need  it  least.  But  as  college  teach- 
ers are  in  the  economic  sense  employees  and  they  are  collected  into  groups  under 
conditions  of  work  and  pay  which  are  comparable,  it  is,  therefore,  practically  feasible 
for  them  to  unite  for  common  protection. 

A  further  reason  for  the  institution  of  some  organized  method  of  insurance  and 
pensions  for  college  teachers  lies  in  the  separation  of  the  teachers  from  commercial 
avenues  of  investment.  The  demands  upon  every  college  teacher  are  heavy.  Even  tho 
he  possess  in  high  degree  self-control  and  thrift,  his  accumulations  must  necessarily 
take  the  form  of  modest  monthly  savings.  No  agency  exists  whereby  such  a  teacher 
can  purchase  the  protection  he  needs  at  reasonable  cost,  nor  is  there  any  agency  which 
will  accept  his  monthly  savings  and  guarantee  him  any  larger  interest  than  the  sav- 
ings bank.  Unless  he  devotes  to  investment  studies  an  amount  of  time  likely  to  trans- 
form him  from  a  student  into  a  speculator,  no  way  is  open  to  him  for  increasing  his 
savings  by  investment.  And  yet  from  the  standpoint  of  insurance  teachers  are  pre- 
ferred risks.  Associated  together  they  could  carry  insurance  at  rates  far  below  what 
they  are  called  on  to  pay.  All  this  constitutes  an  additional  economic  reason  for  some 
form  of  association  of  teachers  for  protection  and  financial  security. 

The  maintenance  of  a  pension  system  for  college  teachers  probably  has  some  effect 
in  bringing  able  men  into  the  calling  and  in  keeping  them  in  it.  How  much  weight 
should  be  placed  upon  this  argument  it  is  impossible  to  say.  In  Germany  the  pension 
has  become  so  much  a  part  of  the  teacher's  life  that  he  can  scarcely  conceive  of  accept- 
ing a  place  which  does  not  provide  a  pension.  Teachers  who  are  asked  to  come  from 
Europe  to  America  are  generally  more  concerned  about  the  pension  than  about  the 
scale  of  salary.  How  much  influence,  however,  such  an  inducement  has  upon  the  young 
man  of  thirty  just  about  to  enter  the  profession  and  for  whom  the  pension  lies  thirty 
or  thirty-five  years  ahead,  no  one  can  say.  Its  effect,  if  appreciable,  will  be  evident 
only  after  a  generation.  There  can,  of  course,  be  little  doubt  that  a  pension  system 
brings  to  the  teacher  a  contentment  and  sense  of  security  which  make  for  good  work 
and  for  fruitful  scholarship. 

Turning  to  those  reasons  that  rest  upon  social  and  humanitarian  grounds,  it  is 


PENSION  SYSTEM  FOR  COLLEGE  TEACHERS  JUSTIFIED?      15 

fair  to  say  that  the  pay  of  the  teacher,  while  far  above  that  of  the  laborer,  leaves, 
nevertheless,  but  small  margin  for  the  accumulation  of  money  against  the  larger  risks 
of  life.  The  preparation  of  the  teacher  is  costly,  and  many  men  find  themselves  in 
debt  when  they  begin  their  teaching  career.  The  demands  upon  the  teacher's  income 
are  great,  not  only  for  the  care  of  his  family  and  for  some  measure  of  culture  and 
enjoyment,  but  also  to  enable  him  to  keep  abreast  of  his  profession,  and  if  he  saves 
money  at  all,  it  can  be  done  only  by  the  exercise  of  great  economy  and  self-denial. 
It  would  seem  clearly,  therefore,  in  the  interest  of  the  social  order  that  in  a  profes- 
sion so  circumstanced  some  form  of  organization  should  be  developed  under  which 
the  teacher  could  within  his  means  and  ability  and  without  too  great  a  burden  se- 
cure reasonable  protection  for  his  family  and  reasonable  security  for  himself.  Such 
a  provision  makes  for  happiness,  for  contentment,  and  for  the  general  progress  of 
civilization. 

While  the  teacher  in  the  college  is  seldom  called  upon  to  face  in  old  age  the  depth 
of  poverty  so  common  among  industrial  workers  who  do  not  participate  in  a  pension 
system,  it  remains  true  that  the  loss  of  independence  to  one  who  has  been  throughout 
life  not  only  independent  but  a  helper  of  others  is  a  source  of  pain  and  of  humiliation 
quite  as  great  as  that  of  abject  poverty.  There  are  few  situations  more  painful  than 
that  of  the  old  and  faithful  teacher  who  has  served  his  generation  well,  and  who  finds 
himself  dependent  in  old  age.  The  gradually  developing  conscience  of  humanity  views 
with  increasing  repugnance  the  spectacle  of  deserving  old  age  in  distress.  Where  the 
members  of  a  profession  are  paid  employees,  capable  of  being  organized  into  a  feasible 
pension  system,  the  conscience  of  the  world  to-day  holds  that  some  form  of  organiza- 
tion should  be  instituted  for  their  relief  and  protection.  It  is  this  argument,  not  easy 
to  express,  but  powerful  in  its  operation  upon  the  hearts  and  minds  of  men,  that  forms 
the  strongest  social  reason  for  the  institution  of  some  form  of  pensions  among  college 
teachers. 

While  these  reasons  not  only  justify,  but  in  my  judgment  require,  the  establish- 
ment and  maintenance  of  pension  systems  for  college  teachers,  it  is  still  true  that  the 
experience  of  all  pension  systems,  whether  among  industrial  workers,  among  gov- 
ernmental civil  servants,  or  among  college  teachers,  show  unexpected  difficulties  and 
disappointments.  Pension  systems,  whether  established  for  one  or  another  socied 
group,  are  complicated  with  every  other  personal,  institutional,  and  social  interest. 
The  possession  of  a  pension  or  the  right  to  possess  one  touches  the  financial  interest 
of  every  teacher,  and  tends  to  arouse  that  selfish  conservatism  which  exists  in  greater 
or  less  measure  in  every  human  breast.  No  group  of  men,  however  high-minded,  can 
be  disinterested  in  considering  the  questions  of  their  own  pensions  any  more  than 
they  can  be  disinterested  in  considering  any  other  finsincial  interest  or  personal 
comfort. 

It  cannot  be  denied  also  that  the  possession  of  a-  pension  or  the  prospect  of  its 
possession  sometimes  stops  the  development  of  men,  just  as  the  possession  of  a  mod- 


16       INSURANCE  AND  ANNUITIES  FOR  COLLEGE  TEACHERS 

erate  fortune  deadens  their  energy.  There  is  a  type  of  man  in  all  professions  who, 
once  at  ease  with  respect  to  the  future,  tends  to  sink  into  inactivity. 

While  it  is  true  that  organizations  will  not  ordinarily  rid  themselves  of  old  and 
incompetent  men  except  by  way  of  the  pension,  it  is  equally  time  that  under  a  pen- 
sion system  a  corresponding  pressure  is  put  upon  those  in  authority  to  retain  every 
employee,  whether  competent  or  incompetent,  until  such  time  as  he  shall  have  entered 
upon  his  pension. 

In  other  words,  the  possibilities  for  harm  are  present  in  a  pension  system  whether 
for  laborers  or  for  teachers,  as  they  are  present  in  every  other  social  and  economic 
movement  for  human  betterment.  The  more  one  examines  the  arguments  for  a  pension 
system,  the  more  clearly  he  realizes  that  its  value  to  any  group  and  to  civilization 
will  depend  upon  the  conditions  under  which  the  pensions  are  established  and  the 
methods  employed  in  their  administration.  The  fundamental  assumptions  that  fix  the 
terms  under  which  pensions  are  secured  go  far  to  determine  whether  the  pension  so 
paid  will  in  the  long  run  work  for  the  best  interests  of  those  who  participate  and  for 
the  common  good. 

Admitting,  therefore,  that  some  form  of  pension  system  is  justifiable  and  necessary 
for  college  teachers,  the  value  and  effect  of  the  system  established  will  in  the  final 
analysis  rest  upon  the  determination  of  a  few  fundamental  questions. 

1.  What  are  the  specific  risks  in  the  teacher's  career  that  should  be  met  by  a  relief 
system  ? 

2.  Upon  whom  does  the  responsibility  rest  for  providing  protection  from  these 
risks  ? 

3.  What  is  the  right  form  of  administration  for  such  a  system,  and  who  shall  par- 
ticipate in  it? 

4.  Once  these  fundamental  questions  are  answered,  what  are  the  most  tinistworthy 
actuarial  and  statistical  estimates  for  determining  the  liabilities  of  the  future? 

These  are  the  questions  to  which  we  now  turn. 


The  Life  Hazards  of  the  College  Teacher 

It  has  been  pointed  out  that  college  teachers,  by  reason  of  their  economic  situation 
as  employees  of  corporations,  form  a  class  in  the  body  politic  capable  of  organization 
into  pension  systems.  Before  we  undertake  to  fix  the  responsibility  for  the  inaugura- 
tion and  support  of  such  a  system,  it  is  well  to  have  definite  conceptions  of  the  hazards 
against  which  the  teacher  needs  to  be  protected.  To  comprehend  these,  one  must  have 
in  view  the  economic  and  professional  situation  of  the  typical  teacher. 

The  man  or  woman  who  becomes  at  this  day  a  teacher  in  the  college  or  university 
has  passed  thru  college,  taken  post-graduate  work,  and  begins  his  academic  career  as 
an  assistant.  This  term  is  used  in  colleges  or  universities  to  describe  a  man  or  woman 
somewhere  between  the  ages  of  twenty-five  and  thirty  who  is  part  student  and  part 


THE  LIFE  HAZARDS  OF  THE  COLLEGE  TEACHER  17 

teacher,  working  for  a  nominal  salary  usually  from  $300  to  $500  a  year.  At  the  age 
of  thirty  the  representative  teacher  in  one  of  the  better  colleges  will  be  an  instructor 
with  a  salary  of  about  $1400  a  year,  at  thirty-five  he  will  be  junior  professor  with 
a  salary  of  about  $2000,  and  between  the  ages  of  forty  and  forty-five  he  will  have 
become  a  full  professor  with  a  salary  of  $3000.  'Iliis  scale  of  salaries  is  representa- 
tive of  the  better  American  colleges,  of  perhaps  two  hundred  out  of  the  existing  nine 
hundred.  In  the  great  number  of  American  colleges  of  small  endowment  the  scale 
of  salaries  is  lower.  It  may  be  said,  however,  that  in  many  small  communities  a  sal- 
ary of  $1200  goes  fai-ther  than  a  salary  of  $1800  in  a  city,  so  that  the  relative  value 
of  college  salaries  cannot  always  be  estimated  on  a  merely  statistical  basis. 

The  typical  college  teacher  marries  as  soon  as  he  has  secured  a  firm  seat  as  instruc- 
tor or  junior  professor,  generally  by  the  time  he  has  reached  the  age  of  thirty.  Altho 
college  families,  particularly  in  the  eastern  part  of  the  United  States,  show  the  dimin- 
ishing birth  rate  characteristic  of  all  American  families,  it  remains  true  that  the  typi- 
cal teacher  will  have  a  wife  and  from  two  to  three  children  to  support.  Under  such 
circumstances  it  is  clear  that  if  his  family  is  to  grow  in  culture  and  refinement,  this 
can  be  accomplished  only  by  good  management  on  the  part  of  husband  and  wife 
accompanied  by  foresight  and  self-denial. 

The  instructor  Avho  has  married  and  undertaken  the  responsibilities  of  a  family 
upon  the  modest  salary  which  is  to  be  his  as  a  teacher  cannot  possibly  safeguard  him- 
self or  his  dependents  against  all  of  the  risks  of  life.  A  healthy  optimism  is  a  part 
of  the  necessary  endowment  of  the  nonnal  human  life.  Looking  forward,  therefore, 
to  fair  health  and  ordinary  security  of  place,  the  teacher  can  expect  to  defend  him- 
self and  those  dependent  upon  him  only  against  those  most  serious  hazards  which 
the  lack  of  an  independent  income  necessarily  brings.  What  are  these  hazards  ? 

The  first  and  greatest  hazard  to  which  the  teacher  subjects  his  family  is  that  of 
his  premature  death.  Of  a  thousand  men  who  are  instructors  at  the  age  of  thirty, 
nearly  one-half  will  not  reach  the  pensionable  age.  Against  this  hazard  the  teacher  is 
in  honor  bound  to  make  such  provision  as  his  circumstances  permit.  The  protection 
thus  provided  is  not  for  himself,  but  for  wife  and  children. 

The  second  hazard  which  he  must  seek  to  anticipate  concerns  himself  primarily, 
altho  it  touches  closely  the  happiness  and  security  of  his  wife,  and  to  a  less  degree 
that  of  his  children.  This  is  the  risk  of  the  termination  of  his  earning  capacity  by 
increasing  age  or  disability. 

The  most  important  economic  problem  which  the  man  living  upon  modest  salary 
has  to  face,  and  one  whose  solution  is  at  once  delicate  and  difficult,  is  to  give  due 
weight  to  these  two  risks,  and  to  determine  what  proportion  of  his  income  should  be 
devoted  to  the  daily  needs  and  pleasures  of  his  family,  what  proportion  should  go  to 
the  protection  of  that  family  in  the  case  of  his  untimely  death,  and  what  proportion 
should  go  to  his  own  protection  and  theirs  when  his  income-earning  capacity  ceases. 

These  briefly  stated  are  the  capital  hazards  which  every  teacher  with  a  family  must 


18       INSURANCE  AND  ANNUITIES  FOR  COLLEGE  TEACHERS 

face.  To  set  this  situation  clearly  before  the  college  teacher,  and  then  to  put  within 
his  reach  the  means  of  dealing  with  it  is  a  service  of  the  highest  social  and  educa- 
tional importance. 

As  protection  to  wife  and  children  against  the  first  of  these  hazards, — the  pre- 
mature death  of  the  bread-winner,  —  only  one  agency  has  been  provided  in  our  civ- 
ilization, insurance  in  some  form.  Insurance  is  essentially  a  method  of  reducing  indi- 
vidual risk  by  cooperation.  It  is  not  the  only  way  of  meeting  such  risk,  but  the  man 
who  is  supporting  a  family  upon  a  modest  salary  has  rarely  any  other  open  to  him. 

Security  to  the  teacher  himself  in  old  age  can  be  afforded  only  by  an  annuity, 
whether  it  be  provided  in  one  way  or  another.  This  annuity  should  be  planned  in 
such  form  as  to  protect  the  wife  in  case  she  survives  her  husband. 

The  risk  of  disability  is  a  remote  one,  but  when  it  falls  upon  a  teacher  who  is  the 
head  of  a  family,  it  creates  one  of  the  most  painful  situations  that  can  arise.  It  will 
later  be  dealt  with  separately. 

In  general,  then,  there  are  two  capital  risks  against  which  the  teacher  must  seek 
protection  in  justice  to  his  family  and  to  himself.  These  hazards  are  the  risk  of  pre- 
mature death  and  the  risk  of  loss  of  income-earning  ability.  The  first  can  be  met 
only  by  some  form  of  insurance;  the  second  only  by  some  form  of  pension.  With  these 
capital  risks  of  the  teacher's  life  definitely  stated,  we  now  turn  to  the  question.  Who 
is  responsible  for  providing  for  college  teachers  and  their  dependents  a  means  of  pro- 
tection against  these  life  risks.? 

Who  is  Responsible  for  the  College  Teacheu's  Protection.? 

American  colleges  present  a  wider  diversity  of  organization  and  of  government 
than  those  of  any  other  country.  There  are  in  the  United  States  between  nine  hun- 
dred and  one  thousand  institutions  chartered  to  confer  higher  degrees.  In  Canada 
there  are  about  twenty  degree-confen'ing  institutions.  These  include  universities  and 
technical  schools  of  the  strongest  type.  They  include  vigorous  and  well-equipped 
colleges.  But  the  great  majority  of  the  institutions  in  the  United  States  are  small, 
poorly  equipped,  and  with  meagre  support.  In  most  of  them  the  struggle  for  exist- 
ence heis  been  so  keen  in  the  past  that  the  question  of  cooperation  for  the  well-being 
of  teachers  has  remained  practically  untouched  either  by  the  teacher  or  by  the  col- 
lege government. 

American  universities  and  colleges  may  be  divided  roughly  into  three  groups:  uni- 
versities and  colleges  supported  and  controlled  by  the  state,  universities  and  colleges 
under  the  control  of  religious  bodies,  and  in  the  third  group,  institutions  which 
have  no  foraial  connection  either  with  the  state  or  with  a  religious  body,  but  which 
exist  as  independent  educational  agencies,  governed  by  their  own  boards  of  trustees, 
responsible  only  to  the  governments  of  the  states  in  which  they  exist,  and  depending 
for  support  upon  endowments  and  tuitions. 


WHO  IS  RESPONSIBLE  FOR  PROTECTION?  19 

The  situation  of  the  teacher  and  his  work  in  these  groups  of  colleges  does  not  vary 
greatly.  The  service  which  he  gives  is  not  materially  different,  whether  carried  out 
in  a  state  institution,  in  a  denominational  college,  or  in  an  endowed  college  not  con- 
nected with  a  religious  body.  Strong  institutions,  mediocre  institutions,  weak  institu- 
tions, exist  in  all  three  groups,  but  the  essential  work  of  the  teacher  is  practically 
the  same  in  institutions  of  corresponding  grade.  It  is  impossible  to  consider  educa- 
tion in  America  without  taking  into  account  the  great  mass  of  institutions  which  ai-e 
engaged  in  educational  work.  While  it  is  clearly  admitted  by  those  who  are  familiar 
with  our  present  situation  that  many  colleges  and  universities  now  exist  which  have 
been  brought  into  being  by  an  unwise  competition  or  by  exaggerated  local  ambi- 
tion, it  remains  true  that  the  development  of  our  institutions  of  higher  learning  will 
be  determined  by  the  gradual  growth  of  those  colleges  which  prove  themselves  able 
to  exist  whether  under  one  form  of  control  or  another,  and  by  the  natural  elimina- 
tion of  those  which  cannot  survive  these  conditions.  But  the  profession  of  the  teacher 
in  these  groups  of  institutions  cannot  be  differentiated^  and  it  is  entirely  in  the  inter- 
est of  education  that  the  well-being  of  the  teacher  should  be  considered  independ- 
ently of  the  form  of  institution  in  which  he  serves.  It  is  also  for  the  interest  of  edu- 
cation that  there  should  be  natural  and  free  migration  of  teachers  from  one  institu- 
tion to  another,  and  from  the  institutions  of  one  group  to  the  institutions  of  another 
group. 

When  one  views,  therefore,  the  American  teacher  as  a  member  of  a  profession,  and 
undertakes  to  determine  the  responsibility  for  establishing  and  maintaining  some 
form  of  protection  against  the  capital  risks  of  his  life,  he  must  be  considered  from 
two  points  of  view,  first  as  an  individual,  secondly  in  the  economic  sense  as  an  em- 
ployee of  a  coi^poration. 

As  an  individual  the  man  of  thirty  has  chosen  for  his  life-work  the  profession 
of  a  teacher.  He  has  married  and  has  assumed  the  responsibilities  of  a  family.  The 
obligation  to  provide  against  the  two  great  risks  of  his  life  rests  primarily  upon 
his  own  shoulders.  Indeed,  there  are  no  other  responsibilities  which  ought  to  take 
precedence  of  these  two.  The  reasons  why  they  have  not  done  so  are  two,  and  this  is 
clearly  brought  out  in  the  letters  of  teachers,  a  summary  of  which  will  be  presented 
later.  In  the  first  place  the  individual  teacher  seldom  thinks  out  completely  the  nature 
of  the  risks  to  which  he  and  his  family  are  exposed.  As  a  rule  he  understands  little 
about  insurance,  still  less  about  annuities,  and  he  and  his  wife  simply  take  the  risk 
themselves,  and  if  misfortune  comes,  help  is  obtained  in  one  way  or  another.  The  second 
reason,  however,  is  the  more  important  one.  No  means  have  ever  yet  been  provided  by 
which  the  teacher  could  secure  adequate  protection  for  his  family  and  for  himself  at 
a  cost  within  his  reach.  To  accomplish  this  is  the  object  at  which  this  study  is  aimed. 

When  one  considers  the  necessities  of  the  teacher  and  of  his  family  in  the  matter 
of  protection  against  these  major  risks  of  life,  he  must  also  take  into  account  his 
economic  situation  as  an  employee  of  a  corporation.  In  this  relation  the  teacher  re- 


20       INSURANCE  AND  ANNUITIES  FOR  COLLEGE  TEACHERS 

ceives  a  remuneration  comparable  to  that  received  by  other  technical  employees,  such 
as  chemists  and  engineers.  He  receives  in  addition  a  far  greater  assurance  of  continuity 
of  employment,  and  this  assurance  is  rapidly  becoming  not  only  stronger  but  more 
general.  The  time  is  not  far  distant  when  in  all  of  the  better  colleges  throughout  the 
country  the  teacher  may  count  upon  the  security  of  his  position,  and  this  notwith- 
standing the  recent  recrudescence  of  political  interference  in  a  number  of  state  uni- 
versities. No  system  of  protection  against  political  interference  or  personal  incom- 
petence can  be  devised. 

The  university  or  the  college  in  its  economic  relations  with  its  teachers  is  a  chartered 
corporation  or  a  direct  agency  of  the  state.  In  either  case  it  assumes  towards  its  em- 
ployees exactly  the  same  obligations  that  all  other  employers  assume,  and  under  the 
quickening  conscience  of  our  time  the  employer  is  held  accountable  not  simply  for 
just  payment  of  wages  and  for  fair  security  of  place;  his  responsibility  does  not  end 
there.  The  employer  is  obligated  to  provide,  for  the  sake  of  his  own  administration, 
a  humane  means  by  which  disabled  and  aged  employees  may  be  removed  from  the 
service.  Experience  has  shown  that  in  the  majority  of  cases  no  corporation  will  re- 
move faithful  employees  who  are  partly  incapacitated,  if  they  are  without  means  of 
livelihood.  On  the  ground  of  efficiency  alone  a  corporation  must  provide  some  means 
for  the  removal  not  only  of  the  incompetent,  but  also  of  those  who  by  reason  of  dis- 
ability or  old  age  are  no  longer  able  to  discharge  their  duties.  On  economic  grounds 
the  government  of  the  college  must  sooner  or  later  assume  responsibility  for  a  system 
of  annuities. 

There  is  a  second  reason  not  so  easy  to  express,  but  none  the  less  powerful,  that 
imposes  upon  every  corporation  employing  men  the  obligation  to  bear  at  least  a  part 
of  some  such  system  of  relief.  That  obligation  arises  out  of  the  modern  social  phi- 
losophy which  holds  that  the  employer  is  in  part  responsible  for  the  happiness  and 
security  of  his  employees. 

Philanthropic  corporations,  such  as  colleges  and  universities,  have  been  slow  to 
recognize  this  obligation.  Industrial  companies  have  established  pension  systems  for 
their  employees  more  freely  than  institutions  like  colleges.  Trustees  of  institutions  of 
learning  have  argued  that  a  manufacturing  establishment  earning  a  dividend  was  in 
a  position  to  do  what  educational  corporations  could  not  do.  There  has  been  a  wide- 
spread feeling  among  trustees  of  colleges  that  they  had  no  right  to  spend  their  in- 
come, whether  from  endowment  or  from  tuitions,  in  the  payment  of  pensions  for  their 
teachers.  Not  infrequently  a  generous  trustee,  rather  than  pay  a  pension  out  of  the 
college  income,  has  put  his  hand  in  his  own  pocket  to  care  for  an  old  teacher  no  longer 
able  to  work,  and  yet  this  same  trustee  will  spend  the  college  income  in  advertising 
to  secure  more  students  when  each  addition  adds  to  the  college  expense;  he  will  vote 
to  spend  the  income  for  a  dormitory  to  house  these  additional  students,  and  he  will 
rarely  hesitate  to  spend  it  for  an  athletic  field  on  which  they  may  play.  College 
trustees  as  a  body,  in  other  words,  have  not  yet  faced  their  obligation  with  respect  to 


WHO  IS  RESPONSIBLE  FOR  PROTECTION?  «1 

the  treatment  of  the  college  employees.  In  this  matter  the  American  college  has  not 
developed  a  corporate  conscience. 

There  can  be  no  question  that  if  an  obligation  rests  upon  the  managei"s  or  directors 
of  any  form  of  human  organization  to  face  their  responsibility  to  their  employees, 
that  obligation  is  strongest  upon  the  trustees  of  coUeges  and  universities.  The  college 
corporation  stands  for  something  higher  than  the  business  corporation.  It  undertakes 
to  represent  an  administration  devoted  to  the  best  ideals  of  life,  the  highest  purposes 
of  civilization.  The  college  management  reflects  these  ideals  best  when  it  sets  them 
forth  in  its  own  administration.  The  college  that  turns  out  an  aged  professor  to 
starve  because  its  trustees  are  unwilling  to  use  any  part  of  its  income  for  his  relief 
stultifies  itself  as  an  exponent  of  humane  civilization.  To  plead  with  the  public  for 
more  money  to  build  dormitories,  lecture  rooms,  athletic  fields,  and  at  the  same  time 
to  refuse  to  face  the  humanitarian  obligations  which  the  civilization  of  our  day  de- 
mands of  all  corporations,  involves  a  complete  misconception  of  the  duty  and  respon- 
sibilities of  the  college  organization.  This  does  not  mean  that  the  college  must  put 
the  protection  of  its  teachers  first ;  it  means  only  that  it  should  consider  the  care  of 
its  employees  as  one  of  the  obligations  to  be  met  in  full  consideration  of  the  other 
obligations  it  has  to  face.  In  the  long  run  that  college  will  be  the  best  exponent  of 
civilization  which  wisely  and  conscientiously  faces  its  own  responsibilities  as  an  or- 
ganization. The  college  corporation  unable  or  unwilling  to  face  this  responsibility 
will  in  time  find  itself  out  of  touch  with  the  social  standards  of  our  civilization. 

The  realization  of  this  obligation  had  already  come  to  the  stronger  American  in- 
stitutions of  learning  before  Mr.  Carnegie  made  his  notable  gift.  Columbia,  Harvard, 
and  Cornell,  for  example,  had  made  provision  in  one  form  or  another  for  meeting 
this  obligation.  In  this  matter  Yale,  under  the  leadership  of  President  Dwight,  led 
the  way  in  the  completeness  and  generosity  of  its  action.  Pensions  were  provided  for 
its  teachers  upon  a  generous  basis.  This  action  was  taken  with  full  knowledge  of  the 
load  which  was  being  assumed.  Shortly  afterward  Harvard  established  a  pension  sys- 
tem on  the  plan  adopted  at  Yale.  The  endowment  available  for  the  purpose  at  the 
time  was  small.  The  corporation  of  Harvard  University  realized  that  it  was  insuffi- 
cient. It  counted,  however,  not  only  upon  the  increase  of  this  endowment,  but  it  stood 
ready  to  pay  these  pensions  out  of  the  current  income  of  the  university  as  an  obli- 
gation comparable  in  its  nature  with  the  other  obligations  of  the  university.  These 
separate  systems  of  pensions  are  now  used  by  the  Yale  and  Harvard  corporations 
only  to  supplement  such  pensions  as  the  Carnegie  Foundation  may  provide. 

When,  therefore,  one  considers  where  the  obligation  rests  to  provide  a  protection 
for  the  teacher  against  the  primary  hazards  of  his  life,  it  is  clear  that  the  responsi- 
bility rests  squarely  upon  the  teacher  and  his  college,  upon  the  worker  and  his 
employer.  Upon  these  two  the  obligation  is  direct  and  definite.  Upon  the  teacher 
and  his  college  must  ultimately  rest  the  working  out  and  maintenance  of  a  general 
^stem  of  pensions  for  college  teachers. 


22       INSURANCE  AND  ANNUITIES  FOR  COLLEGE  TEACHERS 

There  is  one  other  agency  responsible  in  this  matter  in  the  United  States,  Canada, 
and  Newfoundland.  The  Carnegie  Foundation  has  received  a  large  endowment  to  be 
devoted  to  the  promotion  of  teaching,  and  in  particular  to  the  payment  of  pensions 
to  college  teachers.  It  is  the  clear  duty  of  this  agency  so  to  use  its  resources  as  to  aid 
teachers  and  colleges  to  inaugurate  and  maintain  a  system  of  pensions  and  annuities 
adapted  to  the  needs  of  the  great  body  of  teachers. 

The  question,  then,  assumes  this  practical  form :  Can  a  plan  be  devised  under  which 
a  system  of  insurance  and  annuities  can  be  maintained  by  teachers  and  by  their  colleges 
which  shall  be  within  the  limitations  of  the  teacher's  salary  and  within  the  reach  of 
the  college  income  in  view  of  its  other  responsibilities  ?  What  part  in  such  a  plan  falls 
to  the  teacher,  the  college,  and  to  the  Carnegie  Foundation.''  To  these  questions  we 
now  turn. 

The  Function  of  Life  Insurance  and  its  Possibilities 

To  obtain  a  clear  conception  of  what  is  proposed  later,  it  is  necessary  to  bear  in 
mind  the  elementary  concepts  which  underlie  life  insurance.  Insurance  is  essentially 
nothing  more  than  a  method  by  which  the  risk  of  the  individual  is  reduced  by  coop- 
eration. It  is  resorted  to  only  where  uncertainty  of  loss  produces  risk.  Unless  there 
exists  a  possibility  of  loss,  and  at  the  same  time  uncertainty  as  to  the  occurrence  of 
the  loss  or  its  extent,  no  risk  is  present,  and  unless  risk  is  present  there  is  no  field  for 
insurance.  The  employment  of  insurance  as  a  means  to  deal  with  an  uncertain  risk 
is  its  real  function,  and  that  for  which  it  was  instituted.  Insurance  as  a  means  of 
investment  has,  however,  become  so  common  as  in  large  measure  to  confuse  in  the 
public  mind  its  true  function.  It  is  in  the  use  of  insurance  in  its  legitimate  field  that 
the  teacher  finds  his  opportunity. 

The  theory  of  probability  upon  which  the  risk  is  determined  is  familiar  to  all. 
Mortality  tables  have  been  constructed  that  represent  the  life  experience  of  many  thou- 
sands of  individuals.  From  such  observations  it  is  known  that  at  the  age  of  thirty, 
for  example,  about  eight  men  out  of  one  thousand  will  die  during  the  ensuing  year. 
The  probability,  therefore,  of  death  to  an  individual  at  that  age  is  eight  one-thou- 
sandths. The  premium  necessary  to  care  for  this  risk  will  be  equal  to  the  value  of  the 
prospective  insurance  (let  us  assume  $1000)  multiplied  into  the  probability  that  it 
will  be  paid.  The  value  of  the  pure  life  risk  for  one  year  at  age  thirty  is,  therefore, 
approximately  $8  a  thousand. 

When  one  comes  to  buy  a  life  insurance  policy  he  finds  that  the  process  is  much 
more  complicated  and  the  cost  much  greater  than  this.  In  the  first  place  the  company 
does  not  insure  him  from  year  to  year.  That  plan  would  mean  that  the  cost  would  be 
very  low  in  early  life,  but  would  increase  with  age,  and  thus  bring  a  constantly  grow- 
ing load  upon  the  individual  as  he  grew  older.  For  the  convenience  of  the  purchaser 
of  insurance  as  well  as  for  their  own,  the  companies  adopt  a  flat  rate  depending  upon 
the  age  of  the  individual  when  his  insurance  is  taken  out.  This  rate  will  naturally  be 


FUNCTION  OF  LIFE  INSURANCE  AND  ITS  POSSIBILITIES       23 

higher  than  the  cost  of  the  risk  at  the  beginning  and  lower  than  that  cost  as  age 
advances.  This  annual  payment  combined  with  the  accumulations  of  interest  upon 
the  payments  ought  to  furnish  a  sum  of  money  that  will  pay  the  policy  in  the  case  of 
the  death  of  the  representative  life.  This  is  insurance  pure  and  simple.  What  the  indi- 
vidual pays  for  is  the  pure  risk  which  the  company  assumes  in  insuring  him.  On  a  mil- 
lion lives  an  insurance  company  doing  business  upon  this  plan  ought,  if  its  table  of 
mortality  represented  its  experience  exactly,  if  its  income  from  funds  paid  in  by  its 
policy-holders  was  exactly  in  accordance  with  the  rate  of  interest  assumed,  and  if  it 
had  no  other  expenses,  to  come  out  at  the  end  of  a  term  of  years  with  neither  profit 
nor  loss. 

What  actually  happens  is  quite  different.  The  life  risk  that  has  been  refeiTed  to  is 
only  part  of  the  payment  for  which  the  purchaser  will  find  himself  charged.  The  pre- 
mium upon  any  policy  that  he  may  take  out  will  involve  not  only  the  cost  of  this 
life  risk  but  a  large  additional  load.  The  table  of  mortality  assumed  by  the  life  insur- 
ance company  is  based  upon  the  average  life,  whereas  the  teacher  is  a  preferred  risk. 
The  company  also  bases  its  charges  upon  an  assumed  rate  of  interest  of  three  and  one- 
half  per  cent,  whereas  the  actual  interest  that  it  realizes  is  approximately  four  and 
one-half  per  cent.  Finally,  there  are  all  of  the  other  charges  involved  in  doing  the 
business  of  the  company.  These  charges  include  the  cost  of  administration,  the  cost 
of  solicitation  by  agents,  the  cost  of  any  dividends  paid  to  the  stockholders,  taxes,  and 
all  other  charges  over  and  above  the  life  risk.  In  all  these  ways  the  cost  to  the  buyer 
of  the  commodity  we  call  insurance  is  increased.  Let  us  examine  in  detail  some  of  the 
reasons  for  the  high  cost  of  insurance. 

The  table  of  mortality^  upon  which  the  life  risk  is  computed  is  based  on  the  av- 
erage life.  As  a  rule  the  life  experience  of  teachers  is  far  better  than  that  indicated 
by  this  table,  and  the  cost  of  their  insurance  is  at  once  increased  by  its  use.  The  ex- 
perience of  the  Carnegie  Foundation  during  its  ten  years,  while  not  giving  conclu- 
sive evidence  in  this  matter,  indicates  that  the  mortality  of  teachers  does  not  con- 

*  The  best  known  mortality  tables  and  those  most  widely  used  in  America  are  the  American  Mortality  Table,  the 
British  Offices  Table,  and  the  McCIintock  Table.  The  first  was  derived  from  observations  upon  unselected  American 
lives,  the  second  from  the  experience  of  British  insurance  companies,  and  the  last  from  statistics  grathered  from  the 
lives  of  annuitants,  who  are  generally  a  preferred  class.  The  American  Mortality  Table  is  used  by  law  in  many 
states  in  computing  the  life  risk,  this  legislation  having  been  passed,  generally,  at  the  instance  of  the  insurance 
comptanies.  Thus  in  New  York  a  man  who  buys  insurance  finds  the  cost  based  on  one  table  and  when  he  buys  an 
annuity  he  finds  the  cost  based  on  another.  He  buys  his  insurance  on  the  basis  of  the  American  Table — the  more 
expensive  for  insurance — and  he  buys  his  annuity  on  the  McCIintock  Table  —  the  more  expensive  for  annuities. 
The  character  of  the  differences  between  these  tables  in  the  expectation  of  life  at  different  ages  is  indicated  in  the 
following  table,  which  gives  also  the  probability  at  the  various  ages  of  living  to  sixty-five,  which  for  convenience 
is  assumed  as  the  pensionable  age. 


K 

ixpectation  of  L,iJ 

e 

Probability  of  living  to  Age  66. 

Age 

American 

British  Offices 

McCIintock 

McCIintock 

Years 

Tears 

Years 

Per  cent 

26- 

38.81 

38.92 

38.68 

64 

30 

36.33 

36.27 

35.12 

66 

36 

31.78 

31.60 

31.61 

68 

40 

28.18 

27.96 

28.08 

61 

46 

24.64 

24.36 

24.66 

66 

60 

20.91 

20.87 

21.11 

70 

66 

17.40 

17.64 

17.79 

76 

00 

14.10 

14.42 

14.64 

86 

24       INSURANCE  AND  ANNUITIES  FOR  COLLEGE  TEACHERS 

form  to  the  tables  now  in  use.  The  following  table  gives  the  experience  of  the  Foun- 
dation during  these  ten  years  as  compared  with  the  expectation  of  life  in  the  three 
most  widely  used  tables,  the  American  Mortality  Tables,  the  British  Offices  Tables, 
and  the  McClintock  Tables. 

The  first  column  of  the  table  gives  the  number  of  teachers  upon  the  pension  list 
from  the  institutions  associated  with  the  Foundation  throughout  each  fiscal  year.  Thus 
in  1906-07  there  were  thirty-seven  names  upon  the  pension  list  on  October  1, 1906. 
The  next  column  gives  the  average  age  of  these  thirty-seven  men  at  the  date  named. 
The  next  column  contains  the  sum  of  the  parts  of  the  year  experienced  by  those  who 
entered  the  list  during  the  year.  The  three  columns  following  indicate  the  number  of 
deaths  that  would  be  expected  among  all  these  persons  according  to  the  American, 
British,  and  McClintock  tables  respectively.  The  last  column  indicates  the  number  of 
deaths  that  actually  occun*ed  in  each  year. 


Year 

Full  Year 
Experience 

Average 
Age 

Partial 
Experience 

Expected  Deaths 
American     British     McClintock 
Offices 

Actual 
Deaths 

1905-06 

— 

— 

8.95 

.7 

.6                 .6 

0 

1906-07 

37 

72 

9.05 

3.5 

3.4              3.2 

7 

1907-08 

71 

71.6 

5.85 

6.0 

5.6               5.5 

6 

1908-09 

90 

72.3 

11.10 

8.3 

7.6               7.1 

4 

1909-10 

129 

72.6 

5.80 

11.0 

10.6             10.0 

10 

1910-11 

157 

72.4 

5.60 

13.2 

12.2             12.0 

9 

1911-12 

174 

72.3 

5.20 

14.5 

13.9             13.3 

8 

1912-13 

198 

72.6 

5.30 

17.0 

15.5             15.4 

13 

1913-14 

207 

73.1 

5.60 

18.5 

16.8             16.7 

9 

1914-15 

207 

73.7 

5.25 

19.2 

17.3             17.0 

18 

Total 

111.9 

103.5           100.8 

83 

It  will  be  seen  that  the  experience  of  the  Foundation  during  these  ten  years  shows 
a  mortality  among  teachers  below  the  most  conservative  of  these  tables.  This  result 
is  not  to  be  given  too  great  weight.  It  rests  upon  too  few  lives  and  covers  too  short 
Ml  experience.  Perhaps  in  the  long  run  the  mortality  experience  of  the  Foundation 
will  not  differ  widely  from  the  expectation  of  the  more  conservative  tables.^ 

In  the  second  place  the  legal  rate  of  interest,  three  and  one-half  per  cent,  is  lower 
than  that  realized  by  the  most  conservative  insurance  companies.  It  is  true  that  a  part 
of  this  difference  is  returned  by  some  life  insurance  companies  in  the  form  of  what  is 
called  "  dividends,"  a  term  in  itself  a  misnomer.  There  remains  always,  however,  added 
to  the  cost  of  the  life  risk  the  load  due  to  cost  of  administration,  to  the  great  cost  of 
solicitation,  to  taxes,  and  to  various  other  expenditures.  This  load  varies  in  different 
organizations.  The  Presbyterian  Ministers'  Fund,  which  has  now  conducted  a  life 
insurance  business  very  successfully  for  one  hundred  years,  has  reduced  these  costs  to 
a  low  rate  by  doing  away  with  agents  and  by  the  use  of  simple  and  effective  admin- 

*  This  is  suggested  by  the  experience  of  the  Foundation  with  the  lives  of  teachers  who  have  been  pensioned  as 
individuals.  The  mortality  during  ten  years  among  these  teachers  has  equaled  the  expectation  of  the  Mortality 
tables.  All  insurance  companies  are  subject  to  wide  fluctuations  in  their  mortality  experience.  A  period  of  small  losses 
is  balanced  by  a  succeeding  period  of  large  ones. 


FUNCTIOxV  OF  LIFE  INSURANCE  AND  ITS  POSSIBILITIES       25 

istration.  The  strong  life  insurance  companies  still  pay  large  commissions  to  agents, 
tho  not  upon  the  scale  of  former  years.  All  of  this  cost,  from  whatever  source,  falls 
upon  the  policy-holder  a«d  raises  the  cost  of  insurance. 

It  would  seem  at  first  glance  that  the  cost  of  the  life  insurance  solicitor  could  be 
entirely  dispensed  with,  but  human  nature  is  so  constituted  that  this  has  not  hith- 
erto proved  possible.  Insurance  companies  that  undertake  to  sell  insurance  over  the 
counter  at  low  cost  obtain  but  a  limited  number  of  policy-holders  or  spend  large  sums 
in  advertising.  The  average  man  will  not  insure  unless  he  is  urged  to  do  so  by  an 
agent,  and  thus  the  policy-holder  continues  to  pay  some  one  to  urge  him  to  do  the 
thing  which  his  own  intelligence  and  foresight  would  naturally  prompt  him  to  do. 

The  following  table  indicates  the  difference  in  cost  of  an  annual  premium  of  an 
ordinary  life  policy  of  $1000,  according  as  one  uses  three  and  one- half  per  cent  or 
four  and  one-half  per  cent  as  the  basis  of  computation,  the  American  Table  of  Mor- 
tality being  assumed  in  each  case. 

Age  at                       Net  Premium  Net  Premium  Difference 

Issue  atiWo  at  4^% 

35  $15.10  $13.42  $1.68 

30                                 17.19  15.34  1.85 

35                                 19.91  17.88  8.03 

40                                23.50  21.30  2.20 

45                                  28.35  25.99  2.36 

50                                34.99  32.49  2.50 

It  is  not  easy  to  compare  theoretical  costs  with  the  charges  of  the  standard  in- 
surance companies,  because  of  the  fact  that  the  mutual  insurance  company  returns 
so-called  dividends.  It  is,  of  course,  quite  evident  that  the  initial  cost  of  the  policy 
in  these  companies  is  much  higher  than  that  due  to  the  life  risk  alone.  Thus,  at  age 
thirty  the  level  rate,  using  the  American  Mortality  Tables  and  three  and  one-half 
per  cent,  would  be  $17.19;  using  four  and  one-half  per  cent  it  would  be  $15.34.  The 
stronger  and  more  conservative  life  insurance  companies  charge  at  age  thirty  about 
$24  for  the  first  annual  premium  on  a  policy  of  $1000.  Later,  these  premiums  are 
diminished  by  the  return  of  dividends.  The  following  table  indicates  the  nature  of 
the  saving  which  could  be  effected  over  the  net  rates  of  the  stronger  insurance  com- 
panies, after  deducting  the  dividends,  assuming  an  interest  rate  of  four  and  one-half 
per  cent,  and  continuing  the  use  of  the  American  Tables  of  Mortality. 

Orddtart  Lite  Insukance  $1000 


Age  at 
Issue 

Cost  of  Risk 
using  m% 

Net  Cost  of  Policies 
five  years  old 

Differeiu 

30 

$15.34 

$19.24 

$3.90 

35 

17.88 

22.14 

4.26 

40 

21.30 

25.96 

4.66 

45 

25.99 

31.08 

5.09 

50 

32.49 

38.12 

5.63 

26       INSURANCE  AND  ANNUITIES  FOR  COLLEGE  TEACHERS 

In  other  words,  the  net  cost  to  the  policy-holder  of  a  $1000  insurance  policy  (ordi- 
nary life)  in  the  standard  companies  is  from  twenty  to  twenty-five  per  cent  above  the 
cost  of  the  life  risk,  and  this  does  not  include  the  profit  which  arises  from  the  use  of 
a  mortality  table  in  excess  of  actual  experience. 

It  does  not  follow  from  this  that  life  insurance  can  be  furnished  by  commercial 
bodies  at  cost,  or  that  it  ought  to  be  so  furnished.  So  long  as  insurance  is  upon  a  com- 
mercial basis,  the  cost  of  administration,  of  agents,  of  taxes,  and  of  other  legitimate 
charges  will  inevitably  make  the  cost  of  insurance  to  the  purchaser  higher  than  the 
cost  of  the  life  risk. 

The  cost,  however,  is  but  one  phase  of  the  insurance  problem  so  far  as  it  relates  to 
the  ability  of  the  teacher  to  protect  himself  against  the  larger  hazards  of  his  life.  It  is 
not  simply  the  cost  of  insurance,  but  the  way  in  which  the  insurance  has  been  used, 
that  has  hitherto  so  limited  its  value.  The  information  furnished  by  some  thirty- 
five  hundred  teachers  shows  that  while  a  considerable  proportion  of  college  teachers 
carry  no  insurance  whatever,  those  who  do  insure  prefer  some  form  of  endowment  in- 
surance. In  other  words,  the  teacher,  as  do  most  men  of  small  fixed  income,  looks  upon 
insurance  as  a  method  of  saving  and  investment  as  well  as  a  method  of  protection  from 
an  uncertain  hazard.  As  an  investment  insurance  offers  but  meagre  return.  The  letters 
of  teachers  who  have  completed  their  payments  show  general  disappointment  with  the 
outcome  of  such  policies.  One  teacher  complains  that  a  twenty-year  payment  policy 
in  one  of  the  large  New  York  companies  upon  which  he  was  given  to  expect  he  would 
receive  $3800  realized  only  $1400. 

Turning  now  once  more  to  the  picture  of  the  teacher  of  thirty  or  thirty-five,  let 
us  see  what  life  risk  it  is  against  which  he  ought  to  insure.  If  he  can  depend  upon  a 
retiring  allowance  at  sixty-five,  what  he  needs  is  insurance  against  the  risk  of  death 
before  that  age.  By  that  time,  whether  the  system  from  which  he  anticipates  a  pen- 
sion be  a  contributory  one,  or  whether  the  pension  be  furnished  without  cost  to  him, 
his  security  for  old  age  is  provided.  By  that  time,  too,  his  children  have  grown  up  and 
he  is  interested  mainly  in  the  security  and  comfort  of  himself  and  his  wife  in  their 
old  age.  What  he  needs  is  adequate  insurance  until  such  time  as  his  pension  may 
become  available,  whether  it  be  planned  to  come  under  one  form  or  another. 

The  following  table  will  show  that  the  cost  of  protecting  himself  against  this  risk 
is  very  moderate.  These  are  the  years  during  which  his  family  needs  protection  against 
the  risk  of  his  premature  death.  They  are  the  years  during  which  such  a  disaster 
would  cause  the  greatest  loss,  but  they  are  also  the  years  during  which  his  insurance 
costs  least.  This  computation  has  been  made  on  the  basis  of  the  American  Mortality 
Tables  and  the  legal  rate  of  interest  of  three  and  one-half  per  cent.  Such  an  assump- 
tion ought  to  permit  an  agency  which  had  no  expenses  for  agents  or  for  adminis- 
tration to  pay  what  the  insurance  companies  call  a  dividend  out  of  the  following 
rates.  Under  these  assumptions  the  cost  to  insure  the  individual  for  $1000  at  different 
ages,  the  insurance  to  cease  at  age  of  sixty-five,  is  as  follows : 


FUNCTION  OF  LIFE  INSURANCE  AND  ITS  POSSIBILITIES       27 


Age 

so 

35 

40 
45 
50 


Net  Annxtal  Premium 

to  cease  at  Age  of  68 

§11.09 

13.09 

13.39 

15.09 

17.87 

30.49 


Had  these  premiums  been  computed  upon  the  basis  of  four  and  one-half  per  cent 
instead  of  three  and  one-half  per  cent,  they  would  show  a  reduction  of  about  eight  per 
cent. 

A  little  reflection  upon  these  figures  will  show  how  much  nearer  the  actual  protec- 
tion which  the  teacher  needs  would  be  brought  within  his  reach  if  he  could  purchase 
from  some  agency  this  sort  of  insurance  on  such  terms.  A  policy  of  $10,000  taken  out 
at  age  thirty  to  continue  to  age  sixty -five  would  cost  about  $10  a  month.  Begun  at 
age  forty  such  a  policy  would  cost  a  little  more  than  $12  a  month.  Under  such  a  sys- 
tem the  payments  which  teachers  now  make  to  secure  small  and  costly  policies  would 
provide  a  protection  somewhere  near  the  absolute  need  of  their  families.  The  great 
body  of  college  teachers  would  gladly  accept  such  an  opportunity  provided  the  true 
function  of  insurance  were  understood  and  a  trustworthy  agency  were  ready  to  write 
such  policies. 

For  the  present  misconception  of  the  function  of  insurance  the  great  insurance  com- 
panies are  in  part  responsible.  They  have  educated  the  public  away  from  the  primary 
use  of  insurance.  The  process  has  been  a  natural  one.  Endowment  and  tontine  poli- 
cies mean  large  payments,  great  accumulations  in  the  hands  of  the  companies  for 
investment,  and  greatly  increased  commissions  for  the  agents.  The  enterprising  life 
insurance  agent  naturally  sells  an  ordinary  life  or  a  term  policy  only  after  he  fails  to 
persuade  the  purchaser  of  insurance  to  take  one  of  the  more  expensive  forms.  For  teach- 
ers, as  for  all  other  men  upon  fixed  salaries,  investment  policies  are  essentially  against 
their  interest.  They  are  justified  upon  one  ground  only,  and  that  is  the  ground  usu- 
ally assigned  by  teachers  themselves.  Only  by  creating  a  definitely  recurring  obliga- 
tion does  the  typical  teacher  find  it  possible  to  save  money  at  all.  He  realizes,  when 
his  endowment  policy  matures  at  the  end  of  twenty  or  thirty  years,  that  as  an  invest- 
ment it  represents  a  poor  return,  but  he  consoles  himself  with  the  reflection  that  but 
for  the  insurance  policy  he  would  most  probably  have  saved  no  money  at  all. 

It  goes  without  saying  that  ordinary  life  policies  payable  at  death,  or  limited  pay- 
ment policies  (premiums  paid  in  twenty  or  thirty  annual  payments  and  the  policy 
to  mature  at  death),  would,  if  furnished  at  somewhere  near  cost,  meet  the  needs  of 
some  teachers  in  the  matter  of  insurance,  particularly  of  those  who  have  independent 
means.  Any  agency  which  undertook  to  furnish  insurance  to  teachers  under  such  terms 
as  I  have  indicated  could  offer  such  policies.  But  the  typical  teacher,  who  lives  on  his 
salary  and  has  an  annuity  to  look  forward  to,  will  find  a  policy  terminating  at  a  stated 


28       INSURANCE  AND  ANNUITIES  FOR  COLLEGE  TEACHERS 

age  far  better  suited  to  his  needs.  A  life  policy  can  bring  help  only  when  the  insured 
dies.  To  the  man  who  survives  sixty-five  and  who  retires  from  active  teaching  the  pay- 
ment of  the  premiums  becomes  a  serious  burden.  In  many  cases  the  insurance  policy 
is  mortgaged  to  provide  needed  funds  for  an  emergency  or  to  pay  the  premiums.  The 
insurance  money  which  comes  at  the  end  of  old  age  rarely  brings  the  assistance  for 
which  it  was  bought  and  for  which  such  hard  economies  were  practised. 

There  is  another  view  of  the  matter  not  always  recognized,  and  this  is  the  economic 
view.  When  one  insures  his  life  for  the  benefit  of  wife  and  children  it  is  not  the  sor- 
row and  pain  of  his  death  against  which  he  seeks  to  defend  them,  but  the  economic 
loss  due  to  his  premature  death.  This  economic  loss  is  greatest  during  his  active  life. 
In  old  age,  and  generally  long  before  death,  his  economic  efficiency  has  become  greatly 
reduced.  In  many  cases  it  has  disappeared  altogether.  Under  such  circumstances  the 
sum  paid  for  life  insurance  represents  not  a  payment  to  meet  an  economic  loss,  but 
the  slow  accumulation  of  years  of  savings  upon  which  very  small  interest  has  been 
paid. 

More  important  is  still  another  reason.  The  insurance  problem  of  a  teacher  who  is 
looking  forward  to  an  annuity  in  old  age — by  whatsoever  means  provided — is  quite 
different  from  that  of  the  man  who  has  no  such  expectation.  The  sort  of  insurance 
which  I  have  just  described — ordinarily  called  "  Term  Insurance" — combines  with  an 
annuity  in  the  most  advantageous  way  by  using  insurance  at  the  period  of  life  when 
it  is  cheapest  (and  at  the  same  time  most  needed)  and  securing  the  benefit  of  an  annuity 
in  old  age  when  small  annual  payments  have  been  swelled  by  the  accumulations  of 
years.  A  plan  that  will  offer  to  the  teacher  inexpensive  insurance  in  his  active  years 
with  an  assured  annuity  for  himself  and  his  wife  in  old  age  and,  perhaps,  some  pro- 
tection against  disability,  will  go  as  far  to  meet  the  teacher's  life  risks  as  our  social 
machinery  is  now  prepared  to  go.  The  method  of  this  combination  is  next  described. 


The  Cost  of  ^n  Old  Age  Annuity 

It  has  been  pointed  out  that  insurance  when  used  for  its  legitimate  purpose  affords 
a  means  by  which  the  risk  of  loss  to  the  teacher  and  his  family  during  his  productive 
years  may  be  economically  met.  The  payment  of  $10  a  month  by  the  teacher  who 
begins  at  thirty  will  cany  an  insurance  of  $10,000  to  the  age  of  sixty-five. 

Let  us  turn  now  to  the  other  great  risk  against  which  the  teacher  must  defend  him- 
self, that  is,  failure  of  support  after  his  activity  ceases.  What  is  the  cost  of  acquiring 
an  annuity  to  become  operative  at  the  time  when  his  life  insurance  ceases.? 

Let  us  begin  with  the  simplest  case,  and  assume  that  on  the  day  on  which  the 
teacher  is  sixty-five  years  old  his  insurance  ceases  and  that  he  desires  to  have  in  hand 
at  that  time  a  sum  of  money  large  enough  to  purchase  an  annuity  for  the  remainder  of 
his  life.  At  age  sixty-five  the  expectation  of  life  according  to  the  American  Mortality 
Tables  is  11.10  years,  according  to  the  British  Offices  Tables  11.59  years,  and  by  the 


COST  OF  AN  OLD  AGE  ANNUITY  29 

McClintock  Tables  11.76  years.  Using  the  conservative  McClintock  Tables  and  assum- 
ing the  teacher  could  obtain  four  and  one-half  per  cent  interest  on  his  money,  the 
following  annual  payments  would  be  necessary,  beginning  at  different  ages,  to  pro- 
vide an  annuity  of  SIOOO  a  year  to  commence  at  age  sixty-five:  > 

Age  of  beginning  Pavment  _  Annual  Payment 

25  $46 

30  63 

35  88 

40  127 

45  190 

50  305 

If  the  teacher  who  had  accumulated  such  payments  remained  in  the  service  for  some 
years  after  sixty-five,  the  amount  of  his  annuity  would  rapidly  increase.  The  average 
teacher  retired  thru  the  Carnegie  Foundation  is  between  sixty-eight  and  sixty-nine 
years  old.  Such  a  teacher,  beginning  at  thirty  the  payment  of  $63  a  year,  about 
five  dollars  a  month,  and  continuing  it  to  sixty-eight,  would  have  at  his  disposal  an 
annuity  to  the  end  of  his  life  of  about  $1400. 

The  objection  to  this  simple  form  of  annuity,  even  if  some  agency  stood  ready  to 
pay  four  and  one-half  per  cent,  renders  it  unsuited  to  most  teachers.  The  annuity 
thus  estimated  is  based  upon  all  lives,  short  and  long.  It  terminates  at  the  death  of 
the  annuitant,  whether  this  occurs  before  sixty-five  or  after.  At  age  thirty  the  ex- 
pectation of  life  is  about  thirty-six  years.  It  is,  therefore,  a  little  more  than  an  even 
chance  that  a  man  at  that  age  will  live  to  sixty-five.  For  the  man  who  survives  sixty- 
five  by  eleven  years  the  result  would  be  satisfactory.  Under  such  an  arrangement  the 
individual  takes  his  chance  of  surviving,  and  for  the  average  man  the  result  is  sat- 
isfactory. To  the  man  who  has  no  one  dependent  upon  him  the  plan  presents  no  par- 
ticular difficulties  and  secures  for  him  a  support  in  old  age.  Should  he  not  survive  to 
old  age,  he  has  no  need  for  such  support.  His  money  in  that  case  will  have  secured 
for  himself  no  return  except  a  sense  of  security.  His  account,  however,  is  balanced  on 
the  other  hand  by  some  other  man  who  lives  beyond  the  expectation. 

The  disadvantage  of  this  form  of  deferred  annuity  is  that  it  takes  no  account 
of  those  dependent  upon  the  annuitant  for  support.  For  that  reason  it  will  rarely 
happen  that  teachers  will  use  this  simple  and  inexpensive  form  of  annuity.^  In  most 
cases  the  teacher  feels  even  greater  anxiety  for  his  wife  than  for  himself  as  old  age 
approaxjhes.  To  meet  this  a  form  of  annuity  must  be  provided  under  which  the  accu- 
mulated funds  shall  be  available  either  to  the  teacher  or  to  his  family  as  need  may 
require. 

Such  an  annuity  must  fulfil  the  following  conditions: 

1.  The  annuity  must  provide  an  income  that  will  continue  after  the  teacher's 
active  service  until  the  end  of  his  life. 

*It  is  suggested  that  women  teachers  who  have  no  one  dependent  upon  them  may  And  this  form  of  annuity 
attractive. 


30       INSURANCE  AND  ANNUITIES  FOR  COLLEGE  TEACHERS 

2.  A  portion  of  this  income,  say  one-half,  must  remain  after  the  teacher's  death 
to  his  wife,  should  she  survive  him. 

3,  Any  sums  that  the  teacher  has  paid  in  must  be  returned  to  him  with  a  fair 
interest  in  case  of  his  retirement  from  the  teaching  profession.  In  case  of  his 
death  before  the  age  of  retiring,  his  accumulation  must  be  returned  with  a  fair 
interest  to  his  estate  either  in  the  form  of  a  cash  payment  or  in  the  form  of  an 
annuity  to  his  wife.  In  case  of  the  early  death  of  either  or  both  after  his  retire- 
ment, any  sum  remaining  to  his  credit  must  be  returned  to  his  estate. 

These  provisions  completely  defend  the  teacher  and  his  wife  in  old  age.  No  provision 
for  the  support  of  children  has  been  included  for  the  reason  that  in  the  earlier  years 
children  are  protected  by  insurance.  By  the  time  the  teacher  has  come  to  the  age 
where  he  must  depend  upon  an  annuity  or  a  pension  his  children  will  as  a  rule  be 
self-supporting.  To  undertake  an  annuity  system  which  shall  include  the  protection 
of  children  enormously  complicates  the  entire  problem.  It  is  impossible  for  any  plan 
of  insurance  and  annuities  to  meet  all  contingencies.  A  plan  that  provides  fair  in- 
surance during  the  productive  years  and  a  living  income  during  later  years,  and  that 
cares  for  the  widow  of  the  teacher  goes  as  far  as  any  plan  ought  at  this  day  to  seek 
to  go  in  meeting  the  hazards  of  the  teacher's  life. 

If  we  assume  that  the  teacher  desires  at  the  age  of  sixty-five  to  have  ready  for  him- 
self an  annuity  of  $1000  a  year,  half  of  this  after  his  death  for  his  wife,  and  to  have 
any  remaining  sum  of  his  accumulations  returned  to  his  estate,  it  would  be  necessary 
to  have  available  at  that  date  $10,640.20.  In  order  to  accumulate  this  sum,  assuming 
again  that  some  agency  stands  ready  to  pay  four  and  one-half  per  cent  on  the  money, 
payments  must  be  made  at  the  respective  ages  such  as  are  shown  in  the  following 
table;  the  McClintock  Tables  are  used. 


Age  of  beginning  Payment 

Annual  Payment 

Equivalent  Monthly  Payment 

25 

$97.25 

$8.11 

30 

127.71 

10.64 

35 

170.60 

14.22 

40 

233.54 

19.46 

45 

331.77 

27.65 

50 

500.76 

41.73 

These  figures  are  given  in  terms  of  an  annuity  of  $1000  a  year.  It  is  a  simple  matter 
to  compute  from  this  the  cost  of  an  annuity  of  $1500,  $2000,  or  $2500. 

It  is  also  to  be  noted  that  sixty-five  is  chosen  as  the  minimum  age  of  retirement. 
In  most  cases  the  teacher  in  good  health  will  desire  to  remain  in  active  service  for 
some  years  longer.  In  such  an  instance  his  retiring  allowance  increases  and  the  amount 
which  he  would  leave  in  case  of  death  to  his  family  accumulates  rapidly  with  each 
year. 

Without  complicating  these  figures  with  the  many  variations  which  could  be  made 
to  illustrate  the  cases  of  different  teachers,  let  us  clearly  grasp  their  significance.  The 
table  shows  that  a  teacher  beginning  at  age  thirty  a  monthly  payment  of  $10.64  and 


ILLUSTRATIONS  FROM  REPRESENTATIVE  TEACHERS         81 

continuing  to  make  such  payments  until  the  age  of  sixty-five,  provided  he  can  place 
his  money  at  four  and  one-half  per  cent,  will  have  accumulated  a  sufficient  sum  to  pro- 
vide an  annuity  of  $1000  a  year  during  the  rest  of  his  life,  half  this  annuity  to  a  sur- 
viving wife,  or  in  the  case  of  their  death  a  considerable  sum  of  money  for  his  estate. 
This  simple  computation  also  enables  the  college  teacher  to  appreciate  more  clearly 
than  he  could  perhaps  in  any  other  way  exactly  what  is  done  for  him,  whether  by  the 
college  or  by  some  other  agency,  when  a  fi*ee  pension  is  provided.  For  a  teacher  at 
thirty  years  of  age  it  means  simply  that  his  pay  has  been  raised  by  the  amount  of 
$10.64  a  month! 

To  attain  such  a  result,  however,  two  things  are  necessary :  first,  the  foresight  to 
begin  the  payments  at  an  early  age  and  the  persistence  to  continue  them,  and  secondly, 
some  agency  must  be  found  ready  and  able  to  guarantee  four  and  one-half  per  cent 
upon  the  teacher's  deposits.  This  interest  is  practically  the  rate  which  conservative 
insui-ance  companies  at  the  present  day  realize  upon  their  funds,  but  no  savings  bank 
or  trust  company  will  guarantee  any  such  income  to  depositors.  It  is  at  precisely  this 
point  that  an  institution  like  the  Carnegie  Foundation,  having  back  of  it  a  large 
endowment,  finds  its  opportunity.  It  could  at  small  cost  guarantee  to  teachers  the 
rate  of  interest  that  has  been  assumed.  For  many  years  to  come  the  prevailing  rate 
of  interest  promises  to  be  even  higher.  It  seems  clear  that  there  is  here  suggested  the 
means  by  which  permanent  and  satisfactory  provision  for  old  age  may  be  provided  for 
teachers  by  a  method  at  once  dignified,  safe,  and  within  the  reach  of  the  teacher  and 
his  college. 

Before  proceeding  to  develop  the  part  which  an  agency  like  the  Foundation  might 
take  in  this  plan  of  cooperation,  let  us  illustrate  the  working  of  the  insurance  and 
annuity  plan  by  assumed  cases  typical  of  the  experience  of  teachers. 


Illustrations  from  the  Lives  of  Representative  Teachers 

It  will  be  remembered  that  the  typical  teacher  begins  as  an  instructor;  at  the  age 

of  thirty  he  has  a  salary  of  $1 400  a  year,  at  thirty-five  he  is  an  assistant  professor  with  a 

salary  of  $2000,  between  forty  and  forty-five  a  full  professor  with  a  salary  of  $3000. 

From  the  following  table  any  combination  of  insurance  and  annuity  desired  may 

be  worked  out. 


Age 
of  Beginning 

Premium  on  $10,000 
Policy  to  cease  at  Age  65 

AnnualCost  to  accum-tUate 
$1000  Annuity  at  66 

Total  Cost 

25 

$110.90 

$97.25 

$208.15 

30 

120.90 

127.71 

248.61 

35 

133.90 

170.60 

304.50 

JO 

150.90 

233.54 

384.44 

45 

173.70 

331.77 

505.47 

50 

204.90 

500.76 

705.66 

The  most  striking  lesson  to  be  learned  from  this  table  is,  of  course,  the  moderate 


32       INSURANCE  AND  ANNUITIES  FOR  COLLEGE  TEACHERS 

cost  of  insurance  and  annuity  if  one  begins  early  in  life.  Insurance  for  ten  thousand 
\  and  a  life  annuity  for  one  thousand  dollars  costs  a  little  more  than  $20  a  month  to 
one  who  begins  at  the  age  of  thirty. 

This  table  emphasizes  also  the  rapidity  with  which  the  cost  of  the  annuity  increases 
in  proportion  to  that  of  insurance.  At  age  fifty  it  requires  $500  a  year  to  accumulate 
an  annuity  of  $1000  to  become  operative  at  age  sixty-five,  while  $200  a  year  will  carry 
an  insurance  of  $10,000  during  that  same  interval.  In  other  words,  a  teacher  whose 
salary  increases  can  afford  to  take  out  more  insurance,  while  in  the  early  part  of  his 
life  he  should  put  a  larger  proportion  of  savings  into  accumulation.  It  is  sometimes 
stated  that  it  is  more  difficult  at  the  age  of  twenty-five  to  accumulate  $100  a  year 
out  of  a  salary  than  $300  a  year  at  the  age  of  forty-five,  but  there  is  at  least  a  ques- 
tion as  to  the  truth  of  this  assumption.  The  experience  of  teachers  generally  is  that 
such  savings  as  are  made  come  in  the  earlier  years  when  the  demands  of  children  and 
of  social  needs  are  not  so  great.  It  is  exactly  these  savings  which  mount  up  rapidly 
in  old  age,  and  a  teacher  whose  savings  have  begun  to  accumulate  may  easily  pre- 
fer to  effect  later  in  life  a  readjustment  between  insurance  and  annuity  contributions. 

The  cash  accumulations  at  four  and  one-half  per  cent  to  the  credit  of  the  annui- 
tant or  his  heirs  as  time  goes  by  are  shown  in  the  following  table : 

Capital  at  Ages 


SO  36  40  4S  60  65  60 

$543.91   $1221.71  $2066.39  $3119.00  $4430.74  $6065.43  $8102.52 
127.71 


Age  of 
beginning 
Payment 

Annual  Pay- 
ment to  accu- 
mulate $1000 
Annuity  at 
Age  66 

2S 

95 

$97.25 

$97.25 

SO 

127.71 

35 

170.60 

40 

233.54 

45 

331.77 

50 

500.76 

714.26 

1604.37 

2713.61 

4095.91 

5818.51 

7965.20 

170.60 

954.14 

2143.18 

3624.94 

5471.47 

7772.59 

233.54 

1306.16 

2933.87 

4962.31 

7490.08 

331.77 

1855.54 

4167.89 

7049.52 

500.76 

2800.68 

6290.84 

It  is  to  be  noted  that  few  teachers  desire,  if  in  possession  of  full  health,  to  retire  at 
sixty-five,  but  remain  for  one,  two,  three,  or  five  years  longer.  Every  year  above  the 
assumed  minimum  rapidly  increases  the  amount  of  the  annuity,  and,  therefore,  the 
amount  of  the  cash  sum,  if  so  desired,  which  would  come  to  the  teacher's  family.  The 
table  that  follows  shows  the  annuity  which  the  teacher  who  had  accumulated  a  thou- 
sand dollar  annuity  would  receive  at  ages  later  than  sixty-five,  should  he  remain  in  ac- 
tive service,  even  tho  he  discontinued  after  sixty-five  all  subsequent  payments  upon 
the  annuity. 

Jipe  Accumulated  Capital  Amount  of  Annuity 

66  $11,119.01  $1,074 

67  11,619.30  1,155 

68  12,142.23  1,242 

69  12,688.63  1,337 

70  13,259.62  1,440 

71  13,856.30  1,554 
79  14,479.84  1,676 


ILLUSTRATIONS  FROM  REPRESENTATIVE  TEACHERS  38 

Let  us  follow  a  case  typical  of  the  experience  of  the  average  teacher  and  of  the 
average  college.  Starting  a  teacher  as  instructor  at  age  thirty,  let  us  assume  that  a 
minimum  insurance  of  $5000  and  a  minimum  annuity  of  $1000  a  year  is  decided  upon. 
The  annual  cost  of  the  two  would  amount  to  $188.16  or  about  $15.68  a  month.  Five 
years  later  the  teacher  finds  himself  in  the  possession  of  a  salary  $500  larger  than  he 
had  formerly,  and  he  decides  to  devote  $100  a  year  to  an  increase  in  his  protection. 
In  view  of  the  rapidity  with  which  the  cost  of  the  annuity  grows  with  years,  he  decides 
to  put  this  into  the  form  of  an  annuity,  and  thus  obtains  an  increase  of  some  $600  in 
the  annuity,  which  is  thus  brought  up  to  $1600.  Five  years  later,  at  the  age  of  forty, 
finding  himself  again  in  possession  of  a  still  larger  salary,  he  decides  to  take  out  $5000 
more  of  insurance  to  end  at  age  sixty-five,  which  would  cost  him  about  $75. 

Should  this  teacher  live  to  sixty-five,  he  would  have  available  for  his  use  a  retir- 
ing allowance  of  $1600.  Should  he  continue  in  service  three  years  longer  but  make 
no  more  payments,  his  retiring  allowance  would  amount  to  $1987.  His  wife,  in  case 
she  survived  him,  would  share  in  this  retiring  allowance.  Should  this  teacher  die  be- 
tween the  ages  of  forty  and  sixty-five,  he  would  leave  to  his  family  an  insurance  of 
$10,000  and  his  accumulated  savings,  which  would  amount  in  cash  to  the  following 
sums  at  the  respective  ages: 

Age  at  Death  Cath  Value  of  Accumulated  Savings 

40  $2,176.85 

45  3,999.52 

50  6,270,87 

SS  9,101.39 

60  12,628.75 

65  17,024.39 

In  comparison  mth  the  protection  which  this  teacher  and  his  family  would  enjoy, 
for  a  maximum  cost  of  a  dollar  a  day,  the  average  college  teacher  and  his  family  are 
practically  unprotected.  Yet  his  annual  payments  are  only  one  and  a  half  times  those 
now  made  by  teachers  for  life  insurance  alone.  With  the  participation  of  his  college 
this  cost  would  be  but  little  more  than  that  now  spent  for  inaxiequate  insurance.  From 
the  tables  which  have  been  given,  any  teacher  may  work  out  any  combination  of 
insurance  and  annuity  that  he  desires. 

These  illustrations  might  be  indefinitely  multiplied  by  varying  the  combination 
of  insurance  and  annuity,  or  by  varying  the  age  at  which  the  teacher  undertakes  the 
one  or  the  other.  Enough,  however,  has  been  said  to  demonstrate  the  fact  that,  if  we 
consider  the  teacher  not  in  old  age  but  in  the  earlier  years  of  his  career,  a  modest 
payment  will  provide  adequate  protection  thru  insurance  during  his  productive  years 
and  satisfactory  support  for  himself  and  wife  after  his  active  service  ceases. 


y^ 


84       INSURANCE  AND  ANNUITIES  FOR  COLLEGE  TEACHERS 

Are  Pensions  Wages? 

The  effort  has  been  made  to  show  that  the  primary  responsibility  for  the  teacher's 
protection  rests  upon  himself.  It  ought  to  be  said  that  the  correspondence  that  the 
Foundation  has  had  with  college  teachers  proves  the  existence  of  a  general  sentiment 
among  them  in  favor  of  some  form  of  pension  system  under  which  the  teacher  may 
carry  his  fair  share  of  this  load.  Movements  for  free  pensions  have  been  inaugurated  in 
various  states  by  public  school  teachers,  but  the  college  teacher  as  a  rule  desires  to 
know  what  his  responsibility  is,  and  is  ready  to  shoulder  whatever  load  ought  to  de- 
volve upon  him  as  a  husband  and  as  a  father.  The  advocacy  of  free  pensions  by  public 
school  teachers  has  been  due  in  large  measure  to  lack  of  information  concerning  the 
working  of  these  systems  in  other  countries.  The  proposition  that  the  state  furnish 
pensions  without  cost  to  the  teacher  appeals  at  first  glance  to  those  interested.  The 
proposal  touches  that  almost  universal  chord  in  human  nature  which  responds  to  the 
notion  of  getting  something  for  nothing.  Like  most  such  economic  and  social  efforts, 
experience  shows  that  the  man  who  receives  something  pays  for  it  in  the  long  run. 

It  is  generally  agreed  by  economists  that  a  free  pension  provided  by  an  employer, 
whether  that  employer  be  a  government  or  an  industrial  organization,  is  in  effect  a 
part  of  wages.  "In  order  to  get  a  full  understanding  of  old  age  and  service  pensions, 
they  should  be  considered  as  a  part  of  the  real  wages  of  a  workman.  There  is  a  tend- 
ency to  speak  of  these  pensions  as  being  paid  by  the  company,  or,  in  cases  where  the 
employee  contributes  a  portion,  as  hemg paid  partly  by  the  employer  and  partly  by  the 
employee.  In  a  certain  sense,  of  course,  this  may  be  correct,  but  it  leads  to  confusion. 
A  pension  system  considered  as  part  of  the  real  wages  of  an  employee  is  really  paid 
by  the  employee,  not  perhaps  in  money,  but  in  the  foregoing  of  an  increase  in  wages 
which  he  might  obtain  except  for  the  establishment  of  a  pension  system.*"^  While, 
in  the  matter  of  employment,  teachers  are  situated  differently  from  industrial  workers, 
the  economic  relation  of  employer  and  employee  affects  them  directly,  and  it  is  equally 
true  of  teachers  as  of  industrial  workers  that  in  the  long  run  and  under  a  permanent 
system  of  pensions  the  teacher  will  pay  a  large  share  of  his  own  pension,  whatever  sys- 
tem is  adopted. 

To  demonstrate  this  statement  by  statistics  is  not  so  easy,  but  even  in  the  short 
history  of  the  Carnegie  Foundation  many  circumstances  have  combined  to  show  the 
tendency.  It  is  quite  true  that  salaries  in  American  colleges  and  universities  have  been 
increased  in  recent  years,  and  are  likely  to  be  still  further  increased.  Hitherto  these 
salaries  have  not  been  affected  by  the  existence  of  the  pensions  of  the  Carnegie  Foun- 
dation in  a  small  number  of  institutions.  There  is  noticeable,  however,  in  these  institu- 
tions a  tendency  to  hold  instinictors  or  assistant  professors  by  the  help  of  the  pension. 

In  one  way  or  another  the  individual  who  makes  his  career  as  a  teacher,  beginning 
as  an  instructor  and  passing  thru  the  grade  of  assistant  professor  to  full  professor,  is 

*  Albert  de  Roode:  American  Economic  Review,  vol.  iii,  No.  2, 1913. 


TEACHERS'  INVESTMENTS  85 

almost  sure  in  the  course  of  his  life  to  pay  for  his  pension,  even  tho  it  is  provided  by 
some  other  agency.  The  only  way  in  which  he  can  be  sure  that  this  will  not  happen  is 
to  live  under  a  system  in  which  the  question  of  pension  and  the  question  of  pay  are 
separated.  It  will  require  a  generation  of  the  operation  of  any  free  pension  system  to 
demonstrate  this  tendency  to  teachers  themselves. 

An  interesting  commentary  upon  the  attitude  of  employees  after  a  long  period 
of  service  under  a  non-contributory  pension  system  is  afforded  by  the  action  of  the 
civil  servants  under  the  British  Crown  towards  the  pension  system  maintained  for 
their  benefit  for  a  period  of  fifty  years.  After  long  agitation  by  employees,  and  in  re- 
sponse to  an  overwhelming  vote  of  dissatisfaction  over  the  pension  system,  a  Commis- 
sion was  appointed  to  report  on  the  whole  matter,  resulting  in  the  enactment  of  Sep- 
tember 30,  1909,  "which  undertakes  to  overcome  the  objection  of  the  civil  servants 
to  the  forfeiture  of  their  theoretical  contributions,  in  case  of  premature  death  by 
providing  insurance  benefits  in  lieu  of  a  part  of  the  pension." 

The  contention  of  the  employees  was  that  pensions  were  merely  deferred  pay  and 
in  the  long  run  came  out  of  the  wages  of  employees,  and  that  those  who  survived 
received  this  deferred  pay  at  the  expense  of  those  who  died.  The  Commission  accepted 
this  contention,  and  undertook  to  equalize  the  benefits  by  insurance.  The  significant 
fact  is  that  while  the  British  Civil  Service  plan  did  not  require  contributions,  70,000 
out  of  100,000  employees  contended  that  the  pensions  were  deferred  pay,  and  that 
they  would  have  preferred  a  contributory  system  like  that  of  banks,  railways,  and 
municipalities.  Furthermore,  the  Commission  accepted  their  contention  in  the  ques- 
tion of  deferred  pay.  Employees — whether  in  the  civil  service  of  a  government  or 
in  the  employ  of  a  corporation  —  who  are  receiving  a  pension  at  the  hands  of 
an  employer  are  likely  in  the  long  run  to  look  upon  their  pensions  as  deferred  wages. 
It  is  alike  in  the  interest  of  employer  and  employee  to  separate  the  question  of  pay 
from  the  question  of  pension. 

The  teacher,  like  all  other  men,  is  subject  to  the  workings  of  those  economic  and 
social  forces  which  determine  the  rewards  in  all  callings.  It  is,  therefore,  to  his  interest 
that  the  question  of  pension  and  the  question  of  pay  be  separated.  It  is  equally  to  his 
interest  that  his  rights  rest  upon  contractual  relations,  and  that  he  have  a  voice  in  the 
management  of  the  pension  system.  These  he  can  demand  only  when  he  participates 
in  the  financial  cost  of  the  relief  system. 


Teachers'  Investments 

Considering  the  modest  salary  of  the  teacher,  this  title  may  seem  a  misnomer,  yet 
in  the  total  a  large  sum  of  money  is  invested  each  year  by  college  teachers.  Thru  a 
correspondence  with  some  three  or  four  thousand  teachers  efforts  have  been  made 
to  ascertain  the  character  of  these  investments,  and  particularly  of  the  investments 
of  teachers  in  life  insurance. 


86       INSURANCE  AND  ANNUITIES  FOR  COLLEGE  TEACHERS 

Enquiries  show  that  among  teachers  in  small  colleges  a  common  form  of  invest- 
ment is  the  purchase  of  a  home  accomplished  by  gradual  payments.  Individual  teachers 
invest  in  all  the  varying  enterprises  that  attract  other  investors,  including  specula- 
tive ones,  but  the  most  common  form  of  investment  is  insurance.  The  average  teacher 
spends  about  five  per  cent  of  his  income  on  some  form  of  insurance. 

To  ascertain  the  practice  of  American  college  teachers  in  the  matter  of  insurance 
and  to  obtain  also  their  wishes  with  regard  to  it,  a  letter  was  sent  in  December,  1914, 
by  the  President  of  the  Foundation  to  each  one  of  the  five  thousand  teachers  in  the 
universities,  colleges,  and  technical  schools  associated  with  the  Foundation,  asking 
the  cooperation  of  these  teachers  in  ascertaining  the  facts  concerning  the  participa- 
tion of  teachers  in  insurance  and  their  wishes  and  needs  with  regard  to  it.  Replies 
were  obtained  from  some  thirty-five  hundred  teachers,  or  about  seventy  per  cent  of 
those  to  whom  enquiries  had  been  sent.  Some  anxiety  was  felt  lest  this  seventy  per 
cent  of  answers  was  not  representative  of  the  whole  number  of  teachers  involved,  but 
by  taking  up  studies  of  particular  colleges  it  was  ascertained  that  those  who  failed 
to  answer  were  on  the  whole  representative  of  the  majority.  They  were  not  made  up, 
as  was  at  first  suspected,  mainly  of  those  who  had  no  insurance.  Some  had  insurance 
and  did  not  desire  more,  some  had  no  insurance  at  all,  some  did  not  care  to  reply 
to  a  letter  of  enquiry  for  one  reason  or  another.  On  the  whole,  the  majority  which  did 
reply  seems  to  be  thoroughly  representative. 

The  summarized  experience  of  these  thirty-five  hundred  teachers  in  institutions 
scattered  thru  the  United  States  is  shown  in  the  following  table: 


Age 

Salary 

Insurance 

Annual  Coat 

Percentage  of 
Salary 

Instructor 

30 

$1400 

$3000 

$60 

*i 

Junior  Professor 

35 

2000 

3000 

100 

& 

Professor 

40-45 

3000 

5000 

150 

5 

The  first  salient  fact  is  that  a  considerable  proportion,  nearly  twenty  per  cent  of 
teachers,  carry  no  insurance  at  all.  This  proportion  is  larger  naturally  among  the 
younger  teachers.  Eighty-six  per  cent  of  full  professors  have  insurance  in  some  amount, 
while  only  seventy -eight  per  cent  of  instructors  have  insurance. 

Omitting  women  teachers,  who  constitute  about  one-twelfth  of  the  whole  number, 
ninety- three  per  cent  of  full  professors  are  married  or  are  widowers  with  children ; 
eighty-seven  per  cent  of  intermediate  professors  and  seventy  per  cent  of  instructors 
are  married. 

The  number  of  children  in  the  families  of  full  professors  varies  from  zero  to  ten, 
but  the  typical  family  has  three  children.  In  the  western  states  the  typical  family  is 
somewhat  larger,  that  of  New  England  somewhat  smaller,  than  the  normal.  The  num- 
ber of  children  in  the  families  of  intermediate  professors  varies  from  zero  to  eight,  and 
the  typical  family  includes  two  children  with  also  a  tendency  to  larger  families  in  the 
West.  The  number  of  children"  in  the  families  of  instructors  varies  from  zero  to  six, 
and  the  typical  instructor's  family  contains  one  child. 


THE  FINANCIAL  LOAD  UPON  THE  COLLEGE  87 

Characterizing  the  whole  group  of  college  teachers  by  a  single  statement,  it  may  be 
said  that  the  typical  teacher''s  family  consists  of  himself  and  wife  and  two  to  three 
children.  In  addition  it  is  not  infrequent  that  there  are  other  dependents  who  look 
to  the  teacher  for  support. 

Of  one  thousand  teachers  carrying  one  thousand  and  forty-four  policies,  it  was 
found  that  four  hundred  and  fifty-five  endowment  policies  were  taken  out,  four  hun- 
dred and  eleven  limited  payment  life  policies,  two  hundred  and  sixty -eight  ordinary 
life  policies,  one  hundred  term  insurance  policies,  and  the  remainder  were  scattered 
between  fraternal  orders,  accident,  tontine  policies,  and  other  offerings  of  insurance 
companies  and  fraternal  orders.  In  other  words,  the  teacher  has  used  insurance  partly 
as  an  investment  rather  than  solely  for  its  legitimate  purpose. 

One  reason  is  given  by  teachers  for  preferring  insurance  to  any  other  form  of  invest- 
ment, and  this  reason  has  much  to  do  with  the  fact  that  teachers  have  invested  their 
savings  to  such  a  large  extent  in  insurance.  Many  teachers  write  that  they  have  taken 
out  endowment  policies  for  the  reason  that  this  involves  an  obligation  for  a  regularly 
recurring  payment  either  annually  or  semi-annually.  The  teacher  thus  places  him- 
self under  an  obligation  which  he  cannot  well  avoid.  Without  this  definite  fixed  ob- 
ligation a  large  proportion  of  teachers  find  that  they  would  make  no  saving  from 
income  whatever.  It  seems  clear  from  the  tenor  of  many  of  these  letters  that  the  use  of 
insurance  as  an  investment,  and  particularly  the  preference  for  endowment  insurance, 
is  in  no  small  measure  due  to  the  fact  that  this  form  of  investment  provides  a  means 
by  which  the  teacher  is  not  called  upon  for  a  large  payment  at  one  time,  but  under 
which  he  accepts  an  arrangement  which  compels  him  at  regularly  recurring  intervals 
to  set  fiside  a  part  of  his  income  which  otherwise  would  not  be  saved  at  alL  It  is  evi- 
dent that  any  form  of  saving  which  teachers  might  enter  upon  involving  either  insur- 
ance or  annuities  should  rest  upon  payments  of  small  amounts  made  at  regulai'ly 
recurring  intervals.  Monthly  payments  would  best  suit  the  financial  regime  of  the 
teacher,  and  offer  him  the  most  practical  means  of  saving  and  investment. 


The  Financial  Load  upon  the  College 

I  have  sought  to  develop  up  to  this  point  the  fundamental  principles  upon  which 
the  protection  of  the  teacher's  family  and  his  own  security  must  be  based,  and  in  the 
second  place  to  point  out  a  plan  under  which  these  two  ends  can  be  accomplished  at 
a  feasible  cost.  It  has  been  shown  that  both  objects  can  be  accomplished  by  a  com- 
bination of  legitimate  insurance  during  the  productive  period  of  life  with  the  growth 
of  savings  from  interest  as  they  accumulate  over  a  long  period  of  time.  It  remains 
to  show  that  a  participation  in  this  program  is  within  the  reach  of  even  the  small 
college,  provided  some  agency  like  the  Carnegie  Foundation  stands  ready  to  supply 
insurance  and  annuities  upon  favorable  terms. 

As  a  starting-point  let  us  assume  as  a  minimum  provision  for  the  teacher  an  insur- 


38       INSURANCE  AND  ANNUITIES  FOR  COLLEGE  TEACHERS 

ance  of  $5000  to  continue  until  age  sixty-five  and  an  annuity  of  $1000  a  year  to  begin 
at  sixty -five.  The  cost  of  such  a  minimum  provision  is  shown  in  the  following  table: 


Age  of  beginning  Payment 

Cost  of  Insurance 

Coat  of  Annuity 

Total 

25 

$55.45 

$97.25 

$152.70 

30 

60.45 

127.71 

188.16 

35 

66.95 

170.60 

237.55 

40 

75.45 

233.54 

308.99 

45 

86.85 

331.77 

418.62 

The  protection  thus  furnished  falls  far  short  of  what  is  ideal,  particularly  in  the 
matter  of  insurance.  It  may  be  fairly  argued,  however,  that  the  college  may  justly 
confine  its  participation  to  an  agreed  minimum,  leaving  to  the  teacher  himself,  as  his 
salary  increases,  the  responsibility  of  increasing  either  the  insurance  or  the  annuity, 
or  both.  In  any  such  plan  the  college  ought  to  assume  a  limited  liability. 

The  cost  of  this  minimum  amounts  to  about  fourteen  per  cent  of  the  salary,  whether 
one  begin  at  twenty-five  or  forty,  altho  the  annual  payment  is  smaller  the  earlier  the 
age  at  which  participation  begins.  If,  therefore,  a  college  agreed  to  carry  half  the  cost 
of  this  minimum,  the  load  it  would  assume  would  be  equivalent  to  an  increase  in  the 
salary  roll  of  its  teachers  of  somewhere  between  five  and  seven  per  cent.  (The  great 
mass  of  men  would  enter  at  younger  ages  corresponding  to  the  minimum  salary  scale.) 

A  college  which  desired  to  participate  to  a  greater  extent  in  the  relief  plan,  or  to 
offer  to  a  particular  teacher  a  special  inducement  thru  added  protection,  could  vary 
its  participation  as  it  might  desire.  The  assumption  of  half  the  expense  of  $10,000 
insurance  and  $1000  annuity  would  be  equivalent  to  approximately  an  eight  per  cent 
raise  in  salary. 

The  cost  of  participation  in  this  system  of  insurance  and  annuities  is  thus  within 
the  reach  of  any  endowed  college  strong  enough  to  maintain  good  courses  of  instruc- 
tion and  honest  standards  of  admission.  The  expense  can  be  met  by  a  moderate  in- 
crease of  endowment,  or  by  the  use  of  part  of  current  income,  or  by  a  combination 
of  the  two.  The  essential  fact  is  that  such  a  load  is  comparable  in  cost  to  the  other 
things  which  college  trustees  constantly  undertake — the  increase  of  salaries,  the 
erection  of  new  buildings,  the  addition  of  dormitories.  In  a  considerable  number  of 
institutions  the  sums  devoted  to  advertising  or  to  the  promotion  of  athletics  would 
carry  the  cost  to  the  college  of  participation  in  such  a  relief  plan.  Just  as  the  teach- 
er's ability  to  participate  depends  on  his  own  foresight  and  self-denial  rather  than 
upon  the  amount  of  his  salary,  so  also  the  ability  of  the  ordinary  college  to  do  its 
part  in  some  such  orderly  plan  rests  mainly  upon  the  recognition  by  the  college 
corporation  of  its  obligation  to  its  own  employees  as  one  comparable  with  other 
claims. 

It  requires  but  a  moment's  consideration  to  show  the  enormous  difference  between 
such  a  load  and  that  which  a  college  must  assume  if  it  shoulders  the  cost  of  a  free  system 
of  pensions  to  its  old  teachers.  The  cost  of  one  two  thousand  dollar  pension  for  one 


THE  FINANCIAL  LOAD  UPON  THE  COLLEGE       89 

year  would  carry  the  expense  of  the  college  participation  in  the  minimum  just  assumed 
for  twenty  teachers  who  began  at  thirty  years  of  age ! 

While  it  is  thus  clear  that  a  rational  pension  and  relief  system  can  be  instituted 
upon  a  financial  basis  quite  within  the  reach  of  the  modest  college  or  university,  the 
moral  and  economic  obligation  of  the  college  to  carry  its  share  of  the  pension  load 
is  no  less  clear  and  has  already  been  discussed.  Just  what  proportion  of  this  load  is 
the  share  of  the  college  may  be  a  matter  of  discussion.  I  have  assumed  for  the  sake 
of  simplicity  that  the  college  is  to  carry  one-half  of  an  assumed  minimum. 

It  is  of  coui*se  a  fair  subject  of  discussion  whether  the  college  should  confine  its 
participation  to  the  annuity  alone.  Under  the  plan  proposed  the  teacher  will  be  able 
to  purchase  insurance  at  cost.  The  obligation  of  the  college  for  the  maintenance  of 
a  pension  system  is  clear.  No  corporation  has  a  right  to  expect  that  a  system  of  re- 
tirement, in  which  it  is  directly  interested,  will  be  established  without  its  partici- 
pation; nor  can  it  expect  its  employees  to  support  entirely  a  system  of  relief  the 
benefits  of  which,  in  part  at  least,  accrue  to  the  corporation.  The  obligation  to  share 
in  insurance  is  not  so  clear.  Let  us  assume  as  another  basis  of  participation  that  the 
Carnegie  Foundation  furnishes  to  the  teacher  insurance  at  cost  and  carries  the  dis- 
ability cost,  and  that  the  college  and  the  teacher  cooperate  in  the  support  of  a  sys- 
tem of  annuities  available  at  the  minimum  age  of  sixty-five,  when  the  insurance  ceases. 
Let  us  see  how  such  an  assumption  will  work  out,  and  the  chai*acter  of  the  load  that 
would  be  imposed  upon  the  teacher  and  upon  the  college. 

Let  us  assume,  in  the  first  place,  a  typical  teacher's  experience,  and  determine  the 
cost  of  an  annuity  and  the  distribution  of  the  cost  as  between  the  teacher  and  the 
college.  The  teacher  at,  say,  thirty  upon  a  salary  of  $1500  will  begin  an  accumula- 
tion for  an  annuity  in  proportion  to  his  salary.  As  his  salary  increases,  he  will  need 
to  increase  his  savings,  but  here  again  the  circumstances  of  each  man's  situation  can 
be  made  to  adjust  themselves  to  his  problem.  The  man  who  never  receives  a  salary 
of  more  than  SI  500  will  find  a  pension  of  $1000  quite  in  proportion  to  his  economic 
experience.  The  teacher  who  receives  $2500  or  $3500,  or  more,  will  desire  an  annuity 
in  proportion.  Assuming  such  a  situation,  a  typical  experience  of  a  small  college  would 
be  as  follows,  assuming  again  that  the  wife  of  the  teacher  participates  in  the  annuity, 
and  that  unused  accumulations  are  returned  in  accordance  with  the  rates  given  on 
page  30. 

Illustration  of  Experiekce  of  Small  College 
Age  Salary  Amount  Annual  Cost  to  College         Equivalent 

30 
35 

40 
45 

This  experience  would  be  typical  of  moderate-sized,  strong  coUeges.  Should  this 


Salary 

Amount 

of 

Annuity 

fisoo 

$1000 

1600 

1200 

9000 

1400 

2500 

1600 

Cost. 

$128 
161 

of  Half 
Participation 

$64 

80 

Raise  in 
Salary 

5.3% 

5,0 

208 

104 

5.2 

274 

137 

5.2 

40       INSURANCE  AND  ANNUITIES  FOR  COLLEGE  TEACHERS 

teaxiher  continue  without  further  increase  and  retire  as  soon  as  he  became  sixty -five, 
his  pension  of  $1600  would  almost  exactly  equal  that  which  he  would  now  receive 
from  the  Carnegie  Foundation  ($1650)  in  an  associated  institution.  Should  he  con- 
tinue in  active  service  some  years  later,  the  pension  he  would  receive  would  exceed 
that  of  the  Carnegie  Foundation. 

It  goes  without  saying  that  many  details  remain  to  be  settled.  For  example,  a 
teacher  begins  as  an  instructor,  and  the  college  cooperates  with  him  in  providing  an 
annuity.  Five  or  ten  years  later,  he  leaves*  teaching  altogether.  What  becomes  of  the 
accumulations?  In  such  a  case,  the  rules  would  doubtless  provide  for  the  return  to 
the  individual  and  to  the  college  of  the  accumulations  of  each  with  interest. 

The  situation  would  be  similar  in  the  case  of  a  teacher  in  a  university.  The  follow- 
ing table  represents  the  life  experience  of  a  teacher  in  one  of  our  largest  institutions. 
Beginning  with  a  pay  of  $1500  at  the  age  of  twenty-five,  he  advanced  to  $3500  at 
the  age  of  fifty-five.  His  pay  has  not  been  increased  since,  and  he  is  now  sixty-five. 
Should  he  retire  to-day,  his  pension  from  the  Carnegie  Foundation  would  be  $2150. 
Let  us  see  how  this  would  have  been  worked  out  upon  the  basis  of  a  cooperation 
between  the  college  and  the  teacher: 

Age  Salary  Amount  Annual  Cost  to  College         Equivalent 

25 
30 
35 
45 
55 

The  plan  of  insurance  and  annuities  as  developed  in  the  preceding  pages  is  feasi- 
ble and  i-ests  upon  a  sound  social  philosophy.  It  is  unlikely  that  a  permanent  system 
of  relief  for  teachers  can  be  built  up  on  any  other  lines.  Nor  will  the  teacher  ever  be 
secure  until  he  can  have  a  personal  contract  for  his  insurance  and  for  his  annuity. 

In  the  practical  carrying  out  of  the  plan  one  great  difficulty  remains.  The  whole 
argument  has  rested  upon  the  assumption  that  the  teacher  and  the  college  begin  their 
cooperation  in  the  relief  system  while  the  teacher  is  still  young — below  forty-five. 
If  a  college,  or  an  industrial  establishment,  or  a  railway  could  start  to-morrow  with 
all  its  employees  thirty  years  of  age,  the  inauguration  and  conduct  of  such  a  system  of 
relief  would  be  simple  and  easy.  This  ideal  situation  from  the  pension  point  of  view 
never  presents  itself.  Those  who  make  up  the  workers  in  an  organization,  whether  it 
be  a  college  or  a  factory,  include  many  old  men,  some  of  them  already  failing  in  the 
strength  to  carry  their  work.  Such  men  are  too  old  to  participate  in  any  relief  plan, 
and  the  cost  of  paying  their  full  pensions  is  too  heavy  for  any  college  to  bear.  This 
is  the  load  known  under  the  term  "accrued  liabilities,"  the  load  of  pensions  already 
accumulated  upon  the  lives  of  men  above  middle  age.  It  is  the  spectre  of  the  accrued 
liabilities  that  has  held  back  the  strongest  colleges  from  undertaking  any  pension 


Salary 

$1500 
2000 

Amount 

of 
Annuity 

$1000 

1500 

2000 

17S0 

2500 

2150 

3500 

2150 

Cost 

$97 
161 

of  Half 
Participation 

$48,6 

80.5 

Raise  in 
Salary 

3.2% 

4.0 

203 

101.5 

5.0 

336 

168.2 

6.7 

336 

168.2 

4.8 

THE  ACCRUED  LIABILITIES  41 

plan.  For  a  generation  the  cost  is  prohibitive,  and  no  college  has  been  willing  to  inau- 
gurate an  insurance  and  annuity  system  which  was  to  apply  only  to  younger  men,  one 
whose  fruits  were  to  be  reaped  only  after  the  lapse  of  years.  In  this  way  the  shadow  of 
the  accrued  liabilities  of  one  generation  has  always  obscured  the  pension  rights  of 
the  generation  to  follow.  It  is  necessary  at  this  stage  of  the  discussion  to  deal  with 
this  question,  which  lies  squarely  in  the  path  of  any  pension  plan  which  can  be  devised. 


The  Accrued  Liabilities 

Every  plan  for  maintaining  a  pension  system  has  sooner  or  later  encountered  the 
difficulties  of  the  accrued  liabilities,  and  upon  this  rock  most  pension  schemes  have 
foundered. 

Various  methods  have  been  adopted  in  dealing  with  pensions  for  old  men  who  have 
borne  no  share  in  their  cost.  In  certain  government  pensions,  where  the  unlimited  re- 
sources of  the  government  were  available,  the  accrued  liabilities  have  been  paid  in  fall 
as  they  have  matui'ed,  no  matter  how  great  the  expense.  More  commonly  the  pension 
system,  as  in  some  of  the  Australian  states,  has  broken  down  under  the  gradually 
accumulating  weight  of  these  liabilities. 

In  some  cases,  in  anticipation  of  this  danger,  the  scale  of  pensions  for  a  generation 
has  been  cut  to  a  point  so  low  as  to  make  their  payment  possible,  but  such  a  pre- 
caution generally  destroys  the  practical  value  of  the  pension  system.  A  pension  must 
bear  some  reasonable  relation  to  the  income  earned  in  active  service  in  order  to  bring 
relief.  A  pension  which  would  be  satisfactory  in  amount  to  a  laboring  man  would 
bring  scant  relief  to  a  retired  teacher. 

Still  another  method  of  dealing  with  the  accrued  liabilities  is  not  to  take  them 
into  considei'ation  at  all  in  the  establishment  of  the  pension  system,  but  to  open 
the  opportunities  of  the  pension  system  only  to  young  lives.  While  this  method  is 
financially  sound,  the  objections  to  it  are  too  great  to  be  overlooked.  Such  a  solu- 
tion leaves  the  generation  which  has  borne  the  burden  of  the  day  uncared  for,  a  situa- 
tion which  offends  our  general  sense  of  justice.  Furthermore,  as  a  practical  matter  a 
pension  system  that  is  to  show  its  results  only  after  a  lapse  of  many  years  requires 
a  more  sustained  effort  than  most  organizations  find  it  possible  to  make.  Whatever 
solution  is  adopted,  however,  the  rights  of  the  coming  generation  to  a  fair  pension 
system  should  not  be  overshadowed  by  the  sympathy  for  the  needs  of  the  generation 
just  passing  from  active  service. 

In  the  inauguration  of  what  is  to  grow  into  a  satisfactory  pension  system  for  the 
institutions  not  now  associated  with  the  Foundation  some  compromise  will  have  to 
be  made  for  a  series  of  years  between  the  assumption  of  the  entire  load  of  accrued 
liabilities  and  the  refusal  to  deal  with  them  at  all.  Like  nearly  all  other  problems 
connected  with  pension  and  relief  plans,  that  of  the  accrued  liabilities  must  be  solved 
partly  upon  financial  considerations  and  partly  upon  the  basis  of  the  larger  human 


42       INSURANCE  AND  ANNUITIES  FOR  COLLEGE  TEACHERS 

interests,  and  an  appeal  must  be  made  to  the  sense  of  justice  of  all  who  are  involved. 
On  the  one  hand  it  is  unfair  that  old  men  ready  to  retire  should  devolve  a  large  part 
of  the  burden  of  their  pensions  upon  younger  men,  a  result  which  would  be  brought 
about  if  they  participated  in  the  pension  plan  at  the  same  rate  as  younger  men.  It 
would  further  be  a  disappointing  attitude  if  the  old  men  of  any  group,  whether  in 
the  industries  or  in  universities,  opposed  the  institution  of  a  relief  plan  because  their 
wants  could  not  be  completely  met.  No  generation  has  the  right  to  demand  that  the 
interests  of  succeeding  generations  be  sacrificed  in  its  behalf.  This  would  be  the  prac- 
tical attitude  of  a  group  of  individuals  who  opposed  a  system  of  relief  which  for  fun- 
damental reasons  could  be  started  only  with  young  lives,  because  it  did  not  meet  with 
the  needs  of  the  old.  One  can  scarcely  imagine  a  gi'oup  of  teachers  assuming  this  atti- 
tude. On  the  other  hand,  while  the  man  who  is  forty  or  younger  might  be  dissatisfied 
if  he  were  taxed  at  a  higher  rate  than  his  own  risk  called  for  in  order  that  the  man 
of  sixty  might  obtain  a  pension  practically  free,  nevertheless  he  could  scarcely  object 
to  an  arrangement  under  which  the  college  for  a  term  of  years  gave  a  relatively  larger 
share  of  its  support  to  the  older  men  for  whom  the  pension  system  had  come  too  late. 
Under  some  such  compromise  as  this  the  old  teacher  of  the  present  day  might  be 
called  upon  to  accept  a  smaller  pension  or  to  wait  longer  for  it  than  would  have  been 
the  case  had  he  been  able  to  enter  the  pension  system  at  the  appropriate  age,  and  the 
young  teacher  must  be  satisfied  with  a  smaller  participation  in  such  moneys  as  his 
college  can  appropriate  to  the  demands  of  a  relief  system. 

By  some  such  plan  each  college  and  group  of  teachers  will  find  it  possible  to  work 
out  a  practical  solution,  if  fairness  and  breadth  of  view  are  present  both  on  the  part 
of  trustees  and  teachers.  The  essential  facts  should  not  be  lost  sight  of.  A  feasible  and 
permanent  relief  system  involving  insurance  and  annuities  can  be  started  only  with 
young  lives.  It  would  be  a  misfortune  if  the  obstacle  of  the  accrued  liabilities  should 
always  stand  in  the  way  of  the  institution  of  a  right  system.  To  do  this  would  be 
to  sacrifice  each  generation  for  that  which  has  gone  before.  Some  compromise  must 
be  found  under  which  the  accrued  liabilities  may  be  dealt  with  to  the  best  ability  of 
the  colleges  and  of  such  agencies  as  are  interested  in  this  problem  without  sacrificing 
the  needs  of  the  next  generation. 

"  The  college  that  is  willing  to  face  its  responsibility  as  an  employer,  therefore, 
will  have  to  decide  first  of  all  what  proportion  of  its  income  it  can  rightfully  de- 
vote to  a  relief  system,  and  how  that  appropriation  can  be  fairly  apportioned  between 
regular  pensions  and  the  accrued  liabilities.  Hitherto  colleges  have  never  had  the 
opportunity  to  consider  any  other  phase  of  the  problem  than  that  presented  by  the 
accrued  liabilities,  or  in  other  words  the  payment  of  the  full  pension  of  old  men  ready, 
and  in  many  cases  needing,  to  retire.  For  them  a  relief  system  of  this  kind  is  pro- 
hibitive. A  college  that  could  pay  without  difficulty  $100  or  $150  a  year  for  a  period 
of  thirty  or  thirty-five  years  would  find  itself  helpless  if  called  upon  suddenly  to 
pay  $1500  or  $2000  a  year  for  a  pension  for  this  same  teacher  when  he  has  arrived 


THE  RISK  OF  DISABILITY  43 

at  the  age  of  sixty -five  or  seventy.  The  small  annual  payment  would  have  been  in 
the  nature  of  a  moderate  increase  in  salary,  while  the  payment  of  the  full  pension 
represents  a  sum  beyond  the  reach  of  the  college  authorities.  The  situation  is  some- 
what like  that  which  would  confront  a  business  corporation  if  it  undertook  to  pay  off 
its  bonds  at  maturity  by  a  lump  sum  from  its  income  instead  of  providing  for  them 
by  an  annual  sinking  fund. 

This  problem  of  the  accrued  liabilities  is  one  that  touches  the  activities  of  the 
Carnegie  Foundation  most  closely,  for  the  payment  of  the  accrued  liabilities  is  pre- 
cisely what  the  Carnegie  Foundation  has  been  doing  for  the  colleges  and  universities 
associated  with  it.  During  the  last  ten  years  it  has  lifted  from  the  shoulders  of  the 
trustees  of  these  institutions  their  accrued  liabilities  in  the  pensions  of  old  men.  It 
would  doubtless  have  been  wiser  had  the  Foundation  at  its  inauguration  agreed  to 
assist  in  these  accrued  liabilities  for  a  term  of  years  on  the  condition  that  a  permanent 
and  sound  pension  plan  be  inaugurated  by  the  colleges  and  their  teachers.  At  that 
time,  however,  the  whole  matter  was  but  little  understood  by  any  one.  The  purpose 
of  the  gift  and  the  intention  of  the  Founder  looked  to  the  free  payment  of  pensions 
to  college  teachers.  The  trustees  and  their  advisers  accepted  the  practice  of  European 
governments.  These  ten  years  of  experience  and  exhaustive  study  of  other  pension 
systems  have  given,  however,  a  new  illumination  of  the  extent  and  the  nature  of  the 
problems.  Traditional  knowledge  has  been  proven  inadequate,  and  accepted  opinions 
untenable.  In  the  light  of  this  experience  and  in  view  of  the  social  philosophy  and  the 
financial  results  of  other  pension  svstems,  it  seems  to  many  who  have  given  thought 
to  these  questions  that  the  time  has  now  come  to  determine  in  what  way  the  Founda- 
tion may  not  only  carry  out  its  obligations  to  the  colleges  associated  with  it,  but  also 
seek  to  put  into  operation  a  permanent  system  for  the  protection  of  teachers  and  their 
dependents,  applicable  to  all  of  the  higher  institutions  of  learning  throughout  the 
United  States,  Canada,  and  Newfoundland.  The  plan  which  has  been  elaborated  has 
an  elasticity  that  will  enable  it  to  fit  the  case  of  any  college  or  of  any  teacher.  While 
it  involves  the  cooperation  of  colleges,  it  contemplates  an  individual  contract  and  an 
individual  account,  capable  of  being  adjusted  to  whatever  changes  the  teacher  himself 
may  encounter. 

The  Risk  of  Disability 

Before  proceeding  to  summarize  in  some  detail  the  methods  by  which  it  is  proposed 
to  establish  a  permanent  system  of  relief  thru  the  cooperation  of  teachers,  college 
boards,  and  the  Carnegie  Foundation,  a  woi-d  should  be  said  of  one  other  risk  hitherto 
merely  referred  to.  The  two  capital  risks,  that  of  premature  death  and  of  inability 
to  earn  a  living  after  sixty-five,  have  been  fully  dealt  with.  There  still  remains  the 
hazard  of  invalidity. 

This  is  a  disaster  infrequent  in  occurrence,  but  with  consequences  more  distressing 
than  any  other  which  overtakes  the  man  of  small  income  with  a  dependent  family. 


44       INSURANCE  AND  ANNUITIES  FOR  COLLEGE  TEACHERS 

Few  applications  made  to  the  Carnegie  Foundation  have  been  so  pathetic  as  those 
in  behalf  of  those  teachers  yet  young,  with  families  dependent  upon  them,  who  break 
down  in  health,  or  the  yet  rarer  case  of  him  who  by  some  sudden  accident  is  left  a 
stricken  and  broken  man  with  the  burden  of  family  obligations  upon  him.  Thus, 
a  teacher  who  has  had  twenty  years  of  service  develops  tuberculosis  and  from  an  in- 
dependent wage-earner  becomes  himself  a  burden.  No  situation  is  more  painful  for  a 
man  of  cultivation  and  independent  spirit.  Its  occurrence  is  comparatively  rare,  yet 
it  is  one  of  those  disasters  against  which  the  profession  of  the  teacher  should  be  pro- 
tected if  feasible  means  can  be  found. 

In  considering  such  means  it  may  be  said  in  the  beginning  that  no  relief  plan  for 
those  who  become  invalids  thru  ill  health  or  accident  can  be  adopted  that  is  to 
take  effect  immediately  upon  the  entry  of  a  man  into  the  calling  of  the  teacher. 
A  large  number  of  men  become  teachers,  remain  a  few  years,  and  pass  into  other  call- 
ings. These  men  make  but  little  contribution  as  a  rule  to  the  work  of  the  teacher. 
No  plan  of  dealing  with  invalidity  and  disability  should  include  these  cases.  Only 
after  a  teacher  has  been  a  certain  number  of  years  in  the  profession,  let  us  say  fifteen 
or  twenty,  can  he  expect  to  share  in  a  plan  devised  for  the  protection  of  teachers 
against  the  hazards  of  their  calling.  The  rule  of  the  Carnegie  Foundation  provides 
that  teachers  in  the  colleges  associated  with  it  who  have  had  twenty-five  years  of  ser- 
vice as  professor,  or  thirty  years  of  service  as  instructor  and  professor,  are  eligible  to 
a  disability  pension  in  cases  of  total  breakdown  as  shown  by  medical  examination. 
This  means  that  a  teacher  is  on  the  average  well  over  fifty  years  of  age  before  he  can 
claim  any  protection  from  this  provision. 

In  seeking  to  deal  with  this  problem  it  is  clear  that  a  distinction  must  be  made 
between  what  can  be  done  in  the  case  of  insurance  and  annuity  and  what  can  be  done 
in  the  case  of  invalidity.  An  agency  dealing  with  the  insurance  of  teachers  must  deal 
with  them  in  accordance  with  the  law  of  the  state  under  which  it  is  organized.  The 
accumulation  of  the  fund  for  an  annuity  is  practically  a  savings  bank  proposal  under 
the  direct  scrutiny  of  the  state. 

Many  regular  insurance  companies  now  include  a  disability  provision  in  their  in- 
surance contracts.  This  provision  takes  care  of  the  premiums  on  the  insurance  con- 
tracts in  case  of  disability.  The  experience  of  these  companies  has  not  been  sufficiently 
large,  however,  to  give  a  sound  actuarial  basis  for  the  calculation  of  a  disability  pre- 
mium. From  three  investigations  which  have  been  made  it  is  evident  that  about 
twenty  cents  a  year  per  $1000  needs  to  be  added  to  the  premium  at  the  age  of  thirty 
in  order  to  guarantee  the  payment  of  premiums  in  case  of  disability.  The  risk  arising 
from  the  inability  to  pay  the  premiums  up  to  the  age  of  sixty-five  on  account  of 
disability  can  thus  be  carried  at  an  extremely  small  cost. 

The  actual  cost  of  providing  a  moderate  pension,  let  us  say  of  $1000,  in  the  case 
of  those  who  become  invalids  has  been  very  difficult  to  obtain.  Thru  the  insurance 
companies  the  Foundation  has  made  every  effort  to  ascertain  the  cost  of  this  risk. 


THE  TEACHER'S  COOPERATION  45 

and  the  companies  have  most  kindly  cooperated  by  placing  at  the  disposal  of  the 
Foundation  the  results  of  their  experience.  The  outcome  of  this  examination  goes  to 
show  that  the  actual  loswi  coming  from  disability  pensions  from  a  group  of  five  thou- 
sand teachers  is  a  very  small  one,  not  comparable  to  the  cost  of  the  two  capital  risks 
to  which  allusion  has  already  been  made.  It  has  seemed,  therefore,  to  those  who  have 
studied  this  problem  carefully,  that  this  risk  is  one  which  might  well  be  assumed  by 
the  Foundation  as  cooperating  agency  under  some  such  conditions  as  the  following : 
In  case  of  a  teacher  holding  a  contract  for  insurance  and  annuity  and  whose  health 
completely  fails  after  a  service  of  fifteen  yeai*s  as  professor,  or  twenty  years  as  pro- 
fessor and  instructor,  the  Foundation  would  at  its  own  cost  continue  to  pay  during 
the  period  of  his  invalidity  the  premiums  on  his  life  insurance  policy  and  also  a  mini- 
mum pension  of  S1200  a  year,  the  benefits  to  his  family  in  the  case  of  his  death  being 
determined  by  the  rules  which  govern  all  other  cases.  This  recommendation  is  made 
after  a  long  enquiry  and  upon  the  ground  that  the  disability  provision,  being  an  ex- 
traordinary and  unusual  one,  can  best  be  borne  by  the  Carnegie  Foundation  itself  in 
its  cooperating  capacity  without  introducing  complications  into  the  system  of  insur- 
ance and  annuities  by  which  the  capital  risks  of  the  teacher's  life  are  to  be  dealt  with. 
Actuarial  computations  show  that  this  load  is  well  within  the  income  of  the  Foun- 
dation once  the  system  is  upon  its  normal  basis,  and  it  is  believed  that  no  better 
use  could  be  made  of  the  trust  funds  than  to  devote  such  proportion  of  them  as  may 
be  necessary  to  meet  this  extraordinary  and  difficult  situation. 


The  Teacher's  Cooperation 

Insurance,  as  has  already  been  pointed  out,  is  nothing  other  than  a  defence  against 
an  uncertain  risk  by  means  of  cooperation.  The  obligation  to  provide  this  defence 
for  one's  family  is  necessarily  left  to  the  individual  man  in  the  ordinary  callings  of 
life  and  in  the  professions.  Thus  the  business  man  who  keeps  a  small  shop,  the  prac- 
tising physician,  or  the  lawyer  provides  insurance,  or  does  not  provide  it,  as  he  may 
determine.  Such  callings  are  conducted  by  men  in  their  individual  capacity.  It  is 
difficult,  if  not  impossible,  to  group  together  business  men  or  lawyers  or  doctors  into 
a  homogeneous  gi'oup  for  the  purpose  of  cooperation  in  insurance.  For  college  teach- 
ers this  can  be  done  because  they  are  in  an  economic  sense  employees,  they  work  upon 
fixed  salaries,  they  are  gathered  in  groups  of  twenty,  fifty,  five  hundred,  in  some 
hundreds  of  institutions  throughout  the  country.  The  scale  of  pay  in  these  groups  is 
in  a  general  way  the  same.  It  is  possible  to  bring  so  homogeneous  a  body  of  men  into 
cooperation  in  insurance  or  in  the  accumulation  of  annuities.  It  is  not  possible  to 
gather  together  individuals  who  are  not  members  of  distinct  organizations,  and  with 
whom  there  does  not  exist  the  definite  economic  relation  of  employer  and  employed. 
To  the  teacher  working  in  one  of  these  college  groups  a  plan  of  cooperation  in  insur- 
ance and  annuities  offers  enormous  advantages,  but  in  order  to  secure  these  advan- 


46       INSURANCE  AND  ANNUITIES  FOR  COLLEGE  TEACHERS 

tages  it  is  necessary  that  the  participation  of  the  teacher  in  any  college  that  desires 
to  share  in  the  plan  of  cooperation  should  be  a  condition  of  his  service  to  the  extent 
of  at  least  an  agreed  minimum.  Without  this  neither  the  individual  nor  the  general 
plan  of  cooperation  can  succeed,  as  the  experience  of  all  insurance  and  pension  asso- 
ciations which  have  been  contributory  but  not  compulsory  has  proven.  Any  college, 
therefore,  that  desires  to  participate  in  such  a  plan  would  find  it  necessary  to  require 
those  entering  its  service  to  participate  in  the  program  of  insurance  and  annuity  to 
the  extent  of  the  agreed  minimum ;  or,  to  put  the  matter  in  another  way,  the  college 
having  done  its  share  would,  if  it  were  to  be  successful  in  its  cooperation,  require  that 
the  teacher  entering  its  service  should  undertake  a  corresponding  participation  as  a 
condition  of  employment.  What  would  result  would  be  not  only  a  distinct  separation 
between  the  question  of  pension  and  the  question  of  salary,  but  an  increase  of  salary 
to  the  extent  of  the  participation  of  the  employing  college. 

This  situation  illustrates  the  questions  that  arise  in  any  cooperative  social  move- 
ment. It  is  not  possible  to  have  simultaneously  all  the  freedom  of  individualism  and 
all  the  benefits  of  cooperation,  but  in  this,  as  in  most  problems  of  social  organization, 
it  is  possible  to  secure  the  essential  benefits  of  cooperation  without  surrendering  that 
measure  of  freedom  to  which  all  membei-s  of  our  social  order  are  entitled.  Therefore, 
the  difficulties  of  administration  would  be  greatest  at  the  beginning,  and  reasonable 
adjustments  would  have  to  be  made  for  men  who  had  invested  in  insurance  to  the 
extent  of  their  ability  and  who  did  not  desire  to  give  up  such  investment.  To  men 
entering  the  teacher's  profession  no  such  question  would  occur,  and  as  time  went  on 
the  difficulties  of  individuals  would  become  less  and  less.  With  patience  it  would  be 
possible  to  work  thru  that  more  difficult  period  of  adjustment  to  the  point  where  the 
great  benefits  of  a  universal  and  adequate  system  of  insurance  and  annuities  can  be 
realized. 

Apart  from  the  question  of  his  own  interest,  there  rests  upon  the  American  col- 
lege teacher  a  distinct  social  obligation  in  the  solution  of  this  matter.  This  arises 
out  of  the  stage  of  development  which  the  pension  question  has  now  reached  in  the 
United  States.  A  process  is  now  going  on  for  the  inauguration  of  pension  systems 
for  wage-earners  in  industrial  companies,  such  as  railways,  manufacturing  companies, 
and  banks.  Similar  pension  systems  are  being  urged  for  public  school  teachers  in  the 
cities  and  states.  The  pension  systems  started  by  all  of  the  American  transportation 
and  manufacturing  companies  are  free  pensions  paid  entirely  by  the  company  and 
upon  conditions  laid  down  by  them.  The  employee  has  no  contractual  right  in  the 
pension,  nor  has  he  any  share  in  the  management  of  the  pension  system.  The  absence 
of  the  obligation  to  participate  and  the  absence  of  a  contractual  right  which  such 
participation  would  give  are  serious  objections  to  all  these  plans,  and  in  the  long  run 
are  likely  to  bring  about  a  situation  in  which  the  giving  of  a  pension  will  be  trans- 
lated into  diminished  pay  and  increasing  dissatisfaction. 

The  employers  who  are  instituting  these  pension  systems  are  acting  from  excellent 


THE  TEACHER'S  COOPERATION  47 

motives,  altho  these  motives  are  in  some  degree  mixed.  The  main  motive  is  human- 
itarian. They  desire  sincerely  to  offer  to  their  employees  that  protection  against  the 
hazards  of  life  which  will  defend  them  and  their  families  against  want.  They  desire 
also  in  many  cases  to  return  in  this  way  a  part  of  the  profits  of  the  business  to  which 
the  employee  has  given  his  labor.  Mingled  with  these  admirable  motives  are  others. 
Employers  hope,  for  example,  that  the  pension  system  will  be  at  least  a  deterrent  in 
the  matter  of  strikes.  They  hope  that  it  will  attach  to  their  service  permanently  the 
more  skilled  and  efficient  workmen.  This  mixture  of  humanitarian  and  utilitarian 
motives  characterizes  all  these  plans. 

Actuaries  employed  by  those  who  have  inaugurated  such  pension  systems  have  not 
always  made  clear  the  difference  in  the  effect  between  a  free  pension  system  and  a  con- 
tributory system.  In  some  cases  it  is  clear  that  the  financial  load  ultimately  resulting 
from  paying  all  of  the  accrued  liabilities  has  not  been  completely  taken  into  account. 
But  most  important  of  all,  the  advisers  of  these  gentlemen  have  not  laid  emphasis 
upon  the  fact  that  a  permanent  pension  system  must  rest  upon  a  contractual  rela- 
tion, that  its  expense  must  be  borne  jointly  by  the  worker  and  his  employer,  and  that 
in  order  to  accomplish  this  cooperation,  each  must  share  in  the  control  and  manage- 
ment of  the  pension  system.  Until  this  cooperation  is  brought  about,  no  enduring 
pension  system  will  be  developed,  nor  one  in  which  the  workman  can  feel  sure  that, 
looking  years  ahead,  he  can  count  upon  a  pension.  Under  present  circumstances  each 
pension  system  is  independent  of  every  other,  and  the  pension  system  tends  to  restrict 
a  healthy  migration  between  the  workers  of  different  companies. 

American  industrial  organizations  have  hitherto  felt  unable  to  establish  a  pension 
system  on  the  basis  of  the  participation  of  employees  in  its  cost  and  in  its  manage- 
ment. They  have  taken  this  attitude  partly  because  they  preferred  to  retain  in  their 
own  hands  the  control  of  the  pension  system  and  feared  to  be  bound  by  a  contractual 
relationship,  but  in  large  measure  their  action  has  been  due  to  the  distrust  and  sus- 
picion with  which  employees  have  looked  upon  the  pension  plan,  a  distrust  due  gen- 
erally to  their  lack  of  knowledge  of  the  elementary  principles  upon  which  a  pension 
system  rests.  A  pension  paid  entirely  by  the  company  they  are  willing  to  «w;cept.  It 
seems  to  them  an  operation  under  which  they  get  something  for  nothing.  Neither 
the  employer  nor  the  employee  has  realized  fully  that  in  actual  cooperation  their 
common  interests  are  to  be  promoted,  and  that  this  cooperation  can  never  be  real 
until  the  pension  assumes  the  form  of  a  contract  involving  a  financial  obligation 
under  specific  rules  both  on  the  part  of  the  employee  and  on  the  part  of  the  employer. 
Until  this  suspicious  attitude  of  the  workman  is  disarmed,  there  seems  little  likeli- 
hood that  industrial  pensions  in  this  country  will  be  placed  upon  a  solid  founda- 
tion,^ and  the  same  situation  holds  with  respect  to  the  movement  for  the  establish- 
ment of  pensions  for  public  school  teachers  at  the  cost  of  the  separate  states.  Here 

*  It  is  si^iflcant,  however,  that  practically  all  English  railways  have  now  adopted  the  contributory  system  of 
pensions. 


48       INSURANCE  AND  ANNUITIES  FOR  COLLEGE  TEACHERS 

again  the  same  questions  arise.  The  burden  of  free  pensions  would  be  a  heavy  load  for 
the  richest  state,  and  if  once  adopted  would  inevitably  put  the  pay  of  teachers  per- 
manently at  a  low  level.  Here  also  the  possibility  of  a  secure  and  adequate  system  of 
protection  for  school  teachers  lies  in  a  cociperation  between  employer  and  employed. 
Hitherto,  however,  when  such  legislation  has  been  enacted,  little  has  been  done  to 
bring  out  the  essential  principles  upon  which  a  permanent  pension  must  rest.  In  this 
matter  Massachusetts,  under  the  leadership  of  an  admirable  commission,  gives  the 
greatest  promise. 

Under  this  situation  as  it  exists  in  our  country  to-day, — a  situation  in  which  the 
industrial  employee  and  the  public  school  teacher  are  agitating  for  free  pensions,  and 
are  suspicious  of  any  plan  which  demands  their  own  contribution  and  offers  them 
participation  therein, — one  may  confidently  count  that  a  profession  of  educated  men 
such  as  college  teachers  may  lead  the  way,  fii*st  in  understanding  and  secondly  in 
inaugurating  an  insurance  and  pension  system  that  shall  be  not  only  in  their  own  in- 
terest but  in  the  interest  of  the  common  good.  By  concerted  and  intelligent  action  in 
this  matter  college  teachers  can  render  a  distinct  service  to  the  whole  cause  of  social 
cooperation,  and  toward  the  removal  of  that  feeling  of  distinist  between  employer  and 
employee  which  the  mention  of  the  pension  system  very  generally  arouses.  It  seems 
hopeless  to  expect  an  intelligent  view  of  a  cooperative  pension  system  to  be  accepted 
by  industrial  workers,  if  such  a  system  does  not  appeal  to  the  intelligence  of  univer- 
sity teachers. 


The  Cooperation  of  the  College,  the  Teacher,  and  the  Carnegie  Foundation 

A  Resume 
The  preceding  pages  have  dealt  with  a  number  of  matters  relating  not  only  to  the 
details  of  insurance  and  annuities,  but  also  to  the  underlying  social  philosophy.  As 
a  matter  of  clearness  I  endeavor  now  to  bring  together  briefly  the  mode  of  coopera- 
tion between  the  college,  the  teacher,  and  the  Foundation  which  this  reasoning  has 
suggested.  In  doing  this  I  have  included  only  so  much  of  detail  as  is  necessary  for 
a  clear  understanding  of  the  plan. 

1.  It  has  been  shown  that  some  form  of  relief  including  insurance  and  pensions 
is  justified  in  the  case  of  college  teachers  both  on  the  ground  of  the  social  and  eco- 
nomic conditions  under  which  teachers  work  and  on  the  ground  of  their  association 
together  in  homogeneous  groups.  In  the  legal  sense  college  teachers  are  employees  of 
corporations.  They  are  gathered  in  groups.  As  a  practical  matter  it  is  possible  to 
bring  these  groups  together  into  a  feasible  system  of  cooperation. 

2.  While  it  is  impossible  and  unwise  in  any  calling  to  undertake  to  anticipate  all 
the  hazards  of  life,  the  teacher  is  obligated  to  protect  himself  and  those  dependent 
upon  him  against  the  two  main  hazards  that  lie  in  the  way  of  one  who,  lacking  inde- 
pendent means,  depends  upon  a  modest  salary;  namely,  the  risk  of  premature  death 


A  R^SUMJfi  49 

during  his  productive  period  and  the  risk  of  the  failure  of  income-earning  power  when 
productivity  ceases. 

3.  The  obligation  to  find  protection  against  these  two  capital  hazards  of  the  teach- 
er's calling  rests  upon  the  same  moral  and  economic  considerations  that  determine 
the  responsibility  in  all  human  callings.  In  the  case  of  the  teacher  this  responsibility 
is  shared  by  two  groups,  those  who  work  and  those  who  employ.  The  workers  are 
college  teachers,  the  employers  are  the  governing  boards  of  colleges  and  universities. 
Upon  these  two  groups  rests  the  obligation  to  provide  some  means  within  the  reach 
of  the  teacher  by  which  he  may  secure  for  himself  and  his  family  protection  against 
the  two  serious  hazards  of  his  employment. 

4.  This  protection  can  be  secured  upon  a  feasible  financial  scale  only  by  insurance 
at  cost  during  the  productive  life  of  the  worker  combined  with  an  annuity  accumu- 
lated during  the  long  years  of  productive  work.  Under  such  an  arrangement  insur- 
ance is  used  when  it  is  cheapest  and  most  needed,  and  advantage  is  taken  of  the  rapid 
increase  of  accumulations  which  comes  at  the  end  of  a  term  of  years. 

5.  Individual  colleges  could  not  undertake  such  a  scheme.  Their  teaching  staffs  con- 
stitute groups  too  small  to  maintain  with  safety  plans  of  insurance  and  annuities, 
nor  could  colleges  command  the  capital  necessary  to  afford  security.  A  general  plan 
which  in  the  long  run  shall  be  open  to  all  college  teachers  of  sound  qualification  can 
be  carried  out  only  thru  the  instrumentality  of  some  organization  having  sufficient 
capital  to  command  security  and  to  guarantee  a  good  rate  of  interest  upon  the  sum 
total  of  small  contributions.  Finally,  such  an  agency  must  of  necessity  cooperate  in 
a  generous  and  sympathetic  way  with  both  colleges  and  teachers.  It  is  this  function 
which  the  Carnegie  Foundation  may  well  aspire  to  fill. 

The  part  that  it  might  take  in  such  a  program  may  be  outlined  under  the  follow- 
ing terms: 

a.  The  endowment  of  the  Carnegie  Foundation  is  a  gift  to  the  teachers  of  the 
United  States,  Canada,  and  Newfoundland.The  obligation  rests  upon  the  trustees  of  the 
Foundation  to  develop  in  time  a  system  of  relief  for  teachers  applicable  to  all  three 
of  these  countries.  The  weaknesses  of  its  present  pension  plan  are  pointed  out  in  the 
following  section,  but  in  considering  any  reorganization  of  its  system  of  pensions 
it  is  essential  that  the  needs  of  all  three  of  these  countries  be  considered,  and  that  a 
system  be  devised  not  only  broad  enough  to  afford  participation  to  the  great  body 
of  teachers,  but  flexible  enough  to  meet  the  needs  of  teachers  in  states  whose  educa- 
tional problems  differ  as  widely  as  do  those  of  New  York,  Quebec,  and  Newfoundland. 

On  the  other  hand,  the  trustees  of  the  Foundation  have  already,  under  certain  reser- 
vations, committed  themselves  to  a  system  of  pensions  in  seventy-three  institutions 
in  the  United  States  and  Canada.  It  \n\\  be  necessary  to  maintain  this  pension  sys- 
tem in  these  institutions  upon  the  existing  rules  for  a  period  of  time  long  enough  to 
satisfy  the  just  expectations  of  the  teachers  in  these  institutions.  The  decision  of  that 
period  of  time  would  be  determined  largely  by  the  question  of  the  age  at  which  a 


50       INSURANCE  AND  ANNUITIES  FOR  COLLEGE  TEACHERS 

teacher  may  profitably  pass  from  the  present  system  of  pensions  to  that  which  is 
proposed.  For  those  teachers  in  the  accepted  institutions  who  are  beyond  this  limit 
the  existing  system  of  pensions  must  be  maintained,  and  the  cost  of  the  accrued  lia- 
bilities for  that  period  of  years  met.  It  will  require  many  years  to  transform  completely 
the  present  system  of  Carnegie  pensions  into  that  which  is  proposed. 

b.  For  legal  reasons,  no  less  than  for  convenience,  it  would  be  necessary  to  carry  on 
the  business  of  insurance  and  annuities  thru  a  sub-agency  controlled  by  the  Founda- 
tion^ This  agency  might  be  called  The  Teachers'  Insurance  and  Annuity  Association, 
incorporated  under  the  laws  of  the  state  of  New  York,  with  a  moderate  capital  stock 
owned  by  the  Foundation.  In  addition  to  its  paid  up  capital  there  must  be  provided 
a  paid  up  surplus  sufficient  to  ensure  complete  stability,  the  surplus  to  be  increased 
from  time  to  time  as  the  number  of  teachers  who  participated  grew.  Such  an  agency 
would  do  a  pure  insurance  and  annuity  business  under  the  direct  scrutiny  of  the  State 
of  New  York  Insurance  Department.  It  would  offer  only  legitimate  insurance  includ- 
ing term  insurance  to  end  at  age  sixty-five  or  later,  ordinary  life  policies,  and  life 
policies  paid  up  in  twenty,  twenty-five,  and  thirty  years.  Such  policies  would  seem 
to  meet  completely  the  needs  of  teachers.  No  policy  greater  than  $25,000  would  be 
written.  It  would  offer  annuities  under  the  terms  already  indicated. 

c.  For  receiving  deposits  of  teachers  and  accumulations  toward  annuities  there 
would  be  organized  a  second  sub-agency,  which  might  be  termed  The  Teachers'  Sav- 
ings Association.  The  sole  function  of  this  agency  would  be  to  receive  the  payments 
of  colleges  and  of  teachers,  to  invest  them  in  sound  securities,  and  to  guarantee  an 
interest  equal  to  that  realized  by  ordinary  conservative  trusts  like  life  insurance  com- 
panies. Upon  the  retirement  of  the  teacher,  the  accumulated  capital  would  be  paid 
to  the  insurance  and  annuity  association  for  the  purchase  of  an  annuity.  In  case  of 
death  before  sixty-five,  the  accumulated  capital  would  either  be  returned  to  the  widow 
of  the  teacher  or  invested  in  an  annuity  under  specified  rules.  In  case  of  retirement 
from  the  teacher"'s  calling,  the  accumulated  capital  would  be  returned  with  interest 
at  an  agreed  rate,  let  us  say,  three  and  one-half  per  cent. 

It  is  generally  agreed  by  those  familiar  with  the  business  of  life  insurance  savings 
that  such  an  agency  should  guarantee  four  and  one-half  per  cent.  At  the  present  time 
and  for  many  years  to  come  this  rate  of  interest  is  likely  to  be  realized  by  trust  funds 
like  those  of  life  insurance  companies.  Later,  should  the  current  rate  of  interest  fall 
somewhat  below  this  figure  for  a  term  of  years,  there  would  seem  no  better  use  of 
trust  funds  like  those  of  the  Foundation  than  to  pay  from  its  own  income  such  annual 
sums  as  might  be  necessary  to  make  good  the  guarantee.  If,  after  a  term  of  years,  it 
was  evident  that  the  current  rate  of  interest  was  permanently  lowered,  future  policies 
could  be  written  at  four  and  a  quarter  per  cent  or  such  other  rate  as  represented  the 
current  income  of  trust  funds  conservatively  managed.  The  object  is  not  to  offer  the 
teacher  an  abnormal  interest  on  his  savings,  but  simply  to  secure  to  him  the  benefit 
of  such  income  as  is  legitimately  obtained  by  conservative  investors,  and  to  protect 


A  R]6SUM6  51 

I  his  savings  against  the  fluctuations  of  this  rate  of  income  due  to  temporary  causes. 
Only  by  some  such  plan  can  the  teacher  hope  to  obtain  a  fair  income  on  his  savings. 
He  is  able  to  put  siside  money  easily  only  in  the  form  of  monthly  payments.  The 
ordinary  commercial  avenues  of  investment  offer  to  him  no  opportunity  for  investing 
his  savings  except  at  extremely  low  interest  or  in  the  way  of  speculation.  To  provide 
such  an  agency  by  which  he  may  help  himself  is  one  of  the  most  direct  and  justifiable 
means  of  practical  relief. 

This  plan  is  an  extension  of  the  system  which  Mr.  Carnegie  has  long  carried  on. 
It  has  been  his  habit  for  years  to  take  care  of  the  savings  of  employees  and  of  many 
acquaintances  of  moderate  means,  guaranteeing  them  a  good  interest. 

The  load  which  might  come  from  such  a  provision  is  a  small  one  compared  with  the 
cost  of  the  accrued  liabilities  which  the  Carnegie  Foundation  is  at  present  carrying. 
For  example,  if  deposits  accumulated  to  the  extent  of  forty  millions  of  dollars  and 
the  Insurance  and  Annuity  Association  realized  but  four  and  a  quarter  per  cent  on  its 
investments,  the  cost  to  the  Foundation  of  making  up  the  four  and  one-half  per  cent 
would  amount  to  $100,000  a  year. 

The  process  of  investment  and  re- investment  would  naturally  require  the  constant 
attention  of  men  qualified  for  such  duties.  It  is  not  realized,  perhaps,  that  this  duty 
already  falls  upon  those  who  administer  the  financial  afFaii-s  of  the  various  institu- 
tions founded  by  Mr.  Carnegie.  These  institutions  together  hold  some  two  hundred 
millions  of  dollars  of  securities,  a  large  part  of  them  being  in  underlying  bonds  of  the 
United  States  Steel  Corporation,  which  under  the  charter  of  the  Steel  Corporation 
are  retired  in  increasing  amounts.  This  process  requires  each  year  the  re-investment 
of  large  sums  of  money.  Thru  the  members  of  its  own  board  and  thru  those  closely 
associated  with  it  there  is  available  to  the  tioistees  of  these  institutions  the  best 
financial  advice  of  the  country.  The  investment  of  a  large  sum  and  its  re-investment 
does  not,  therefore,  present  a  financial  problem  different  from  that  with  which  the 
trustees  are  already  dealing. 

The  financial  load  upon  the  Foundation  would  be  of  the  following  nature:  first 
the  cost  of  administration,  including  the  two  sub-agencies,  if  not  supported  by  their 
own  surplus.  It  would  undertake  to  carry  the  cost  of  the  invalidity  pension  in  the  case 
of  all  teachers  having  insurance  and  annuity  contracts,  and  it  would  doubtless  be 
called  upon  to  carry  some  load  in  connection  with  the  cost  of  the  pensions  of  widows, 
altho  that  load  under  actuarial  computation  is  found  to  be  a  small  one.  It  would 
pay  taxes  on  the  insurance  premiums  and  guarantee  a  good  rate  of  interest  upon  all 
accumulations.  In  so  far  as  these  expenditures  would  not  absorb  the  income  of  the 
Foundation,  it  is  believed  that  assisting  colleges  now  outside  of  the  accepted  list  in 
the  matter  of  their  accrued  liabilities  would  be  its  greatest  service,  not  alone  in  the 
money  which  it  would  furnish,  but  in  the  fact  that  there  would  be  offered  thru  its 
agency  a  feasible,  just,  and  satisfactory  relief  system  available  in  general  to  the  college 
teachers  upon  the  North  American  continent. 


52       INSURANCE  AND  ANNUITIES  FOR  COLLEGE  TEACHERS 

d.  No  system  of  relief  involving  pensions  has  ever  proven  satisfactory  to  those  who 
are  directly  interested,  and  particularly  to  those  who  contributed,  which  failed  to 
offer  some  participation  in  the  oversight  of  the  system  itself.  Where  colleges  and 
teachers  contribute  to  the  support  of  a  system  it  is  just  and  right  that  some  par- 
ticipation in  its  oversight  be  guaranteed  them.  Without,  therefore,  going  into  the 
details  of  such  a  plan,  it  should  be  said  that  the  plan  of  cooperation  which  has  been 
outlined  would  involve  some  form  of  oversight  by  a  board  representing  the  trustees 
of  colleges  and  the  teachers  directly  concerned. 

It  is  believed  that  such  a  plan  as  is  here  outlined  is  feasible  and  just,  and  that  it 
rests  upon  those  principles  which  alone  ensure  permanency. 


The  Present  Pension  System  of  the  Carnegie  Foundation 

In  the  preceding  sections  I  have  sought  to  develop  a  system  of  insurance  and  an- 
nuities adapted  to  the  circumstances  of  the  American  college  teacher,  a  plan  suffi- 
ciently flexible  to  be  generally  available,  and  one  which  has  back  of  it  a  sound  social 
philosophy.  I  turn  now  to  an  examination  of  the  existing  pension  system  of  the 
Foundation,  and  to  the  weaknesses  which  have  become  apparent  in  that  system  dur- 
ing ten  years  of  administration. 

The  trustees  at  the  beginning  of  their  work  had  in  their  possession  a  gift  of  money 
intended  for  the  purpose  of  paying  pensions  under  such  conditions  as  the  trustees 
deemed  wise.  They  sought  to  plan  a  system  which  would  interfere  neither  with  the 
independence  of  the  teacher  nor  with  that  of  the  college.  In  fixing  the  form  of  pen- 
sion system  they  had  in  mind  almost  exclusively  the  needs  of  the  teacher  already  old 
and  without  the  means  to  retire. 

The  pension  system  which  they  have  developed  in  these  ten  years  places  the  in- 
come of  the  Foundation  at  the  service  of  the  teachers  in  a  list  of  associated  colleges 
and  universities.  The  following  benefits,  based  upon  fixed  mles,  are  provided: 

1.  An  old  age  pension  available  at  age  sixty-five  or  later  and  amounting  usually 
to  something  like  sixty  per  cent  of  the  active  pay  of  the  teacher  during  the  last 
five  years  of  service.  The  rules  are  so  framed  that  the  teacher  having  very  small 
pay  receives  a  larger  proportion.  Thus  the  pension  of  a  teacher  whose  salary  is 
$3000  is  $1900;  the  pension  of  the  teacher  whose  salary  for  the  last  five  yeai*s 
was  $1200  would  be  $1000. 

2.  A  disability  pension  granted  in  cases  of  total  disability,  but  only  after  twenty- 
five  years  of  service  as  professor  or  thirty  years  of  service  as  professor  and  in- 
structor. This  benefit  amounts  on  the  average  to  something  lilce  forty  per  cent 
of  the  active  pay. 

8.  To  the  widows  of  teachers  who  have  fulfilled  either  of  these  two  conditions 
a  pension  is  paid  equivalent  to  one-half  of  that  which  the  husband  either  was 
receiving  or  to  which  he  was  eligible. 


PRESENT  PENSION  SYSTEM  OF  CAHNEGIE  FOUNDATION      63 

Seventy-three  institutions,  including  in  their  teaching  staffs  between  five  and  six 
thousand  teachers,  are  associated  in  the  enjoyment  of  these  pension  benefits.  The  finan- 
cial load  resulting  from  these  seventy-three  institutions  during  the  last  five  years  is 
shown  in  the  accompanying  statement.  The  average  pension  amounts  to  approximately 
S1700. 


Year 

Teachers 
Pensioned 

Amount  paid 

in  Teachers' 

Pensions 

Number 

Widows 

Pensioned 

Amount  paid 

in  Widows' 

Pensions 

Total  Anntutl 

Pai/ment  for 

Pensions 

1910-11 

215 

$341,899.16 

52 

$46,720.17 

$388,619.33 

1911-12 

236 

388,338.27 

61 

53,646.37 

441,984.64 

1912-13 

2U 

416,626.37 

67 

62,360.77 

478,987.14 

1913-14 

^68 

444,966.52 

79 

69,523.06 

514,489.58 

1914-15 

289 

473,969.38 

95 

80,152.31 

554,121.69 

The  pension  system  in  the  associated  institutions  is,  therefore,  costing  at  the  present 
time  something  over  two-thirds  of  the  income  available  to  the  Foundation.  According 
to  actuarial  computations  its  ultimate  load  would  be  somewhere  between  one  million 
and  one  million  and  three-quarters  annually,  according  to  the  working  of  certain  fac- 
tors. The  principal  uncertainties  lie  in  the  assumed  mortality  rate  and  in  the  age  of 
retirement.  If  teachers  continue  to  retire  as  at  present  at  an  average  age  of  sixty -eight, 
the  smaller  load  would  be  the  probable  one ;  if  they  retire  promptly  at  the  age  of  sixty- 
five,  the  higher  limit  would  be  the  probable  one.  Sometime  during  the  next  ten  years 
it  will  be  necessary  for  the  Foundation  to  obtain  assistance  from  the  Carnegie  Cor- 
poration in  order  to  continue  the  present  minimum  age  of  retirement. 

In  addition  to  these  payments  of  pensions  in  associated  colleges  a  considerable 
number  of  pensions  have  been  voted  to  individual  teachers  in  some  eighty  other  col- 
leges. At  the  present  time  the  income  of  about  two  and  a  half  millions  of  the  endow- 
ment of  the  Foundation  is  employed  in  the  payment  of  these  pensions. 

With  regard  to  this  system  of  pensions  it  may  be  said  that  the  pensions  themselves 
are  in  the  first  place  upon  a  more  generous  scale  than  are  ordinarily  paid.  This  was 
deliberately  done  after  long  discussion  from  the  conviction,  as  set  forth  in  the  First 
Annual  Report,  that  it  would  be  more  fruitful  in  college  life  to  maintain  a  generous 
system  of  pensions  in  a  limited  number  of  colleges  than  an  inadequate  system  in  many 
colleges.  The  trustees  realized  from  the  beginning  that  the  sum  of  money  at  their 
disposal  and  any  sum  likely  to  come  to  them  would  provide  a  free  pension  system  upon 
the  scale  adopted  for  only  a  limited  number  of  colleges,  certainly  not  more  than  one 
hundred  out  of  the  many  institutions  of  the  United  States,  Canada,  and  Newfound- 
land. They  believed,  however,  that  the  institution  of  a  pension  system  upon  a  gen- 
erous scale  in  such  a  number  of  representative  institutions  would  result  in  the  gen- 
eral adoption  by  other  colleges  of  similar  pension  systems.  While  this  expectation 
has  been  realized  to  some  extent,  the  number  of  colleges  that  have  instituted  pension 
systems  from  their  own  resources  is  very  small. 

As  one  looks  over  the  history  of  these  ten  years  of  free  pensions  he  cannot  lose  sight 


64       INSURANCE  AND  ANNUITIES  FOR  COLLEGE  TEACHERS 

of  the  comfort  and  relief  which  they  have  brought  to  hundreds  of  teachers.  To  these 
teachers  and  to  their  families  the  pension  coming  unexpectedly  in  old  age  after  a  life 
in  which  no  adequate  provision  had  been  made  for  failing  activity  has  come  as  a  very 
gracious  and  noble  charity,  and  has  been  accepted  in  an  admirable  spirit. 

The  weaknesses  of  the  present  pension  system  as  shown  by  the  experience  of  ten 
years  are  these: 

1.  Under  the  existing  rules  a  college  teacher  acquires  a  claim  for  a  pension  only 
after  twenty-five  years  of  service  in  professorial  grade  or  thirty  years  of  service  as 
professor  and  instriKtor  or  as  an  instructor  alone.  This  means  that  the  typical  teacher 
is  between  fifty-fiv^  and  sixty  years  of  age  before  he  has,  under  the  rules,  any  pro- 
tection for  himself  or  his  family.  As  a  system  of  relief,  therefore,  the  existing  pension 
system  touches  but  a  small  proportion  of  the  men  and  women  who  teach  in  the  col- 
lies and  universities.  It  holds  out  to  the  man  of  thirty  a  hope  of  security  which  is 
likely  to  be  iUusory. 

2.  The  fundamental  defect  in  the  existing  pension  system  lies  in  the  assumption 
that  free  pensions  for  college  teachers  would  be  permanently  justified.  In  the  light 
of  ten  years  of  experience  and  in  the  light  of  the  experience  of  European  pension  sys- 
tems this  assumption  seems  to  rest  upon  a  defective  social  philosophy.  No  permanent 
advantage  will  accrue  to  any  calling  or  any  profession  by  lifting  from  the  shoulders 
of  its  members  a  load  which  under  moral  and  economic  laws  they  ought  to  bear. 

The  man  of  sixty-five  unexpectedly  presented  with  a  pension  has  received  a  gra- 
cious gift.  The  man  of  thirty  who  looks  forward  over  an  interval  of  thirty -five  years 
to  its  acceptance  will  pay  for  it  in  one  way  or  another  before  he  receives  it,  and  it 
is  in  every  way  to  his  advantage  that  there  be  no  obscurity  as  to  either  the  question 
of  responsibility  or  financial  certainty,  and  it  is  further  to  his  advantage  that  the 
question  of  salary  shall  be  entirely  separated  from  the  question  of  pension. 

3.  While  salaries  in  American  colleges  have  been  raised  in  the  last  ten  years  and 
are  likely  to  be  still  further  raised,  the  studies  of  the  pension  systems  which  have 
been  a  longer  time  in  existence  seem  to  show  conclusively  that  there  will  develop  in 
the  long  run  a  tendency  to  use  the  pension  as  an  offset  to  higher  salaries,  so  that  a  free 
pension  is  likely  to  be  paid  for  by  him  who  receives  it  at  a  higher  rate  than  it  has 
actually  cost.  One  sees  illustrations  of  this  to-day  in  the  colleges  associated  with  the 
Foundation.  Thus  an  instructor  at  $1500  a  year  who  is  offered  $1800  to  go  to  another 
college  is  induced  to  remain  where  he  is  imder  the  expectation  of  a  pension  thirty 
years  later,  not  realizing  that  the  difference  in  salary  will  pay  for  the  pension  several 
times  over  provided,  of  course,  he  actually  invests  that  difference  in  some  form  of 
security,  a  proviso,  it  is  to  be  said,  that  is  seldom  realized. 

4.  If  these  conclusions  are  sound,  it  is  the  business  of  an  agency  devised  for  the 
betterment  of  the  teacher's  calling  to  bring  about  such  conditions  as  may  make  for 
security  among  the  whole  body  of  teachers.  This  security  will  never  be  attained 
until  the  individual  teacher  has  a  contractual  relation  with  the  agency  guaranteeing 


PRESENT  PENSION  SYSTEM  OF  CARNEGIE  FOUNDATION      55 

the  pension.  In  the  plan  which  has  been  outlined  it  is  provided  that  each  teacher 
who  enters  the  system  shall  receive  an  insurance  policy  comparable  in  value  to  those 
obtained  from  the  soundest  insurance  companies,  and  that  he  shall  obtain  an  annuity 
contract  equally  valid  with  that  of  the  soundest  companies.  Under  such  a  conception 
an  individual  account  must  be  kept  with  each  teacher  who  enters  the  system.  No  plan 
under  which  the  teacher  looks  forward  across  the  interval  of  thirty  years  will  bring 
permanent  security  until  the  teacher  obtains  this  contractual  relation. 

5.  While  the  expectation  of  a  free  pension  many  years  in  the  future  brings  a 
certain  relief  to  the  young  teacher,  it  is  clear  that  this  is  in  the  majority  of  cases 
illusory.  It  is  also  not  altogether  clear  that  the  expectation  of  such  a  pension  may 
not  in  the  long  run  prove  to  be  an  influence  making  against  the  homely  virtues  of  self- 
denial  and  personal  independence.  The  teacher's  ability  to  caiTy  his  load  as  the  head 
of  a  family  and  as  a  member  of  society  depends  more  upon  foresight,  self-denial,  and 
thrift  than  upon  the  scale  of  his  salary.  Apart  from  the  meagre  protection  that  it 
affords,  it  seems  unlikely  that  a  free  pension  system  can  minister  to  those  personal 
qualities  of  independence,  foresight,  and  self-control  that  a  contributory  system  of 
insurance  and  annuities  would  seem  to  strengthen.  In  a  word,  the  social  philosophy 
at  the  basis  of  the  free  pension  conception  is  at  least  doubtful. 

6.  The  experience  of  ten  years  seems  to  indicate  that  the  age  of  sixty-five  as  a 
minimum  age  at  which  retirement  may  be  had  is  too  low.  Army  officers  whose  physi- 
cal vigor  is  a  sine  qita  non  of  service  retire  at  sixty-four.  This  age  was  assumed  with 
the  notion  that  sixty-five  would  be  a  minimum  limit.  In  practice,  however,  it  has 
worked  out  otherwise.  Some  colleges  make  retirement  at  sixty-five  compulsory,  an 
arbitrary  procedure  and  one  not  justified  by  experience.  In  addition  many  teachers 
assume  that  the  attainment  of  this  age  implies  a  certain  obligation  to  retire. 

The  teacher  in  good  health  ought  to  be  at  the  full  tide  of  his  usefulness  at  this 
age,  and  unless  he  has  lost  his  energy  and  enthusiasm,  it  is  to  the  interest  of  the  col- 
lege and  of  himself  to  continue  his  work.  Dr.  William  T.  Harris  earnestly  argued 
with  the  trustees  of  the  Foundation  at  its  inauguration  not  to  place  the  minimum 
limit  for  retirement  below  seventy.  Any  arbitrary  limit  set  upon  the  active  work  of 
the  teacher  seems  regrettable.  One  of  the  pleasantest  pictures  of  a  teacher's  activity  in 
American  colleges  during  the  last  few  years  has  been  that  of  Professor  Gildersleeve 
carrying  his  work  at  Johns  Hopkins  with  full  vigor  well  into  his  eighty-third  year. 

As  a  practical  matter  some  limit  of  retirement  has  to  be  set,  and  this  should  be 
a  matter  of  arrangement  between  the  college  and  the  teacher.  The  experience  of  ten 
years  in  the  Foundation  would  seem  to  indicate,  however,  that  it  would  have  been 
wiser  to  have  set  this  limit  at  sixty-eight  or  seventy,  leaving  the  college,  however, 
free  to  retire  a  teacher  at  its  own  expense  at  the  age  of  sixty-five,  the  pension  to  be 
taken  over  later  by  the  Foundation.  The  plan  of  insurance  and  annuities  which  has 
been  described  provides  in  this  respect  a  far  greater  elasticity,  and  meets  the  needs  of 
both  the  teacher  and  the  coUege. 


56       INSURANCE  AND  ANNUITIES  FOR  COLLEGE  TEACHERS 

7.  At  the  inauguration  of  the  Foundation  the  utmost  care  was  taken  to  remove  any 
appearance  of  conferring  a  pension  on  the  ground  of  charity.  This  was  wise,  but  any 
such  feeHng  which  may  have  existed  has  long  since  disappeared.  No  teacher  has  yet 
refused  a  pension  because  it  smacked  of  charity. 

On  the  other  hand,  the  actual  administration  of  a  free  pension  system  on  this  basis 
leads  to  a  situation  in  which  the  trustees  find  themselves  paying  pensions  to  some  who 
do  not  need  them,  and  thereby  denying  them  to  others  who  need  them  very  much. 
The  proportion  of  well-to-do  men  and  women  among  teachers  is  not  large,  but  the 
proportion  is  probably  increasing.  It  is  a  somewhat  embarrassing  use  of  trust  funds 
when  the  Foundation  adds  a  $2500  pension  to  a  comfortable  income  already  pos- 
sessed by  a  retired  teacher,  or  if  it  adds  a  $1200  pension  to  the  income  of  a  teacher's 
widow  already  in  the  enjoyment  of  a  competence. 

The  trustees  have  not  known  how  to  deal  with  such  incongruities  without  creat- 
ing embarrassment  for  the  teacher  who  had  a  small  income  of  his  own  and  to  whom 
the  possession  of  the  pension  meant  the  difference  between  comparative  comfort  and 
discomfort.  The  question  is  one  which  has  to  be  left  to  the  sense  of  fitness  of  the 
individual  teacher  or  president.  In  the  ten  years  of  its  history  one  teacher  has  de- 
clined the  pension  on  the  ground  that  he  had  a  modest  competence  and  preferred  to 
have  the  pension  go  to  some  teacher  who  stood  in  real  need.  In  the  plan  of  insurance 
and  annuities  which  I  have  described  such  incongruities  cannot  occur. 

8.  The  maximum  retiring  allowance  paid  by  the  Foundation  is  $4000.  For  some 
years  after  its  founding  the  maximum  was  $3000.  The  financial  effect  of  this  change 
upon  the  income  of  the  Foundation  at  the  end  of  the  fiscal  year,  September  30,  1914, 
is  shown  in  the  following  statement :  Seven  pensions  were  in  existence  of  $4000  each; 
twenty-two  were  between  $3000  and  $4000;  seventeen  between  $2500  and  $2900; 
sixty-one  between  $2000  and  $2400;  two  hundred  and  fourteen  between  $1000  and 
$2000;  and  one  hundred  and  six  under  $1000.  Stating  the  matter  differently,  four  per 
cent  of  all  pensioners  had  pensions  of  $4000 ;  twelve  per  cent  had  pensions  between 
$3000  and  $4000;  seven  per  cent  between  $2500  and  $3000;  twenty  per  cent  between 
$2000  and  $2500;  forty-five  per  cent  between  $1000  and  $2000;  and  twelve  per  cent 
below  $1000.  This  includes  pensions  in  all  colleges.  The  raising  of  the  maximum  pen- 
sion, therefore,  from  $3000  to  $4000  had  affected  the  pensions  of  twenty-eight  presi- 
dents and  teachers,  resulting  in  a  total  annual  increase  to  the  pension  roll  of  $12,955. 

While  the  argument  that  the  man  whose  salary  is  reduced  from  $8000  or  $12,000 
to  $4000  may  find  more  difficulty  in  readjusting  his  scale  of  living  than  he  whose 
income  is  reduced  from  $3000  to  $1900  may  have  in  it  a  certain  tiiith,  it  never- 
theless seems  doubtful  whether  in  the  administration  of  pensions  paid  as  a  free  gift 
the  change  was  desirable.  The  three  thousand  dollar  pension  measures  not  the  sum 
of  money  which  the  retired  officer  would  like  to  have,  but  rather  the  sum  of  money 
which  an  agency  founded  for  the  advancement  of  teaching  finds  it  feasible  to  allow, 
from  its  trust  funds  devoted  in  the  main  to  teachers.  The  question  is  a  little  different 


PRESENT  PENSION  SYSTEM  OF  CARNEGIE  FOUNDATION      57 

jfrom  that  of  a  government  retiring  an  army  officer,  or  of  a  city  administration,  such 
as  New  York,  in  retiring  the  president  of  the  City  College,  whose  pension  is  fixed  at 
$5000.  The  matter  is  not  one  of  great  significance  either  from  the  standpoint  of 
the  financial  load  or  of  the  relative  justice  of  the  allotment  of  one  class  of  college 
officers  to  another,  but  on  the  whole  it  seems  clear  that  a  body  of  ti-ustees  adminis- 
tering funds  which  are  the  gift  of  an  individual  may  well  hesitate  to  place  the  max- 
imum pension  at  the  limit  which  a  state  government  might  very  fitly  set.  In  such 
a  system  of  insurance  and  annuities  as  I  have  proposed  no  such  question  could  arise. 
The  college  president  or  the  professor  in  receipt  of  a  large  salary  could  with  increas- 
ing income  invest  in  a  larger  annuity,  an  investment  which  would  require  no  partic- 
ular self-denial  for  him. 

9.  Considering  the  matter  of  free  pensions  from  the  standpoint  of  the  colleges  them- 
selves rather  than  from  the  standpoint  of  the  individual,  it  is  clear  after  ten  years  of 
experience  that  the  selection  of  a  small  group  of  such  institutions  upon  which  to  con- 
fer a  generous  system  of  pensions  to  the  exclusion  of  others  involves  many  difficulties. 
In  selecting  these  colleges  the  trustees  have  sought  to  follow  the  wishes  of  the  Founder, 
and  to  include  small  colleges,  moderate  sized  colleges,  universities  of  moderate  scope, 
and  universities  of  the  strongest  American  type.  It  has  endeavored  also,  in  accordance 
with  the  wishes  of  the  Founder,  to  distribute  these  institutions  geographically,  and 
to  impose  some  form  of  educational  criterion  in  their  selection.  As  time  has  passed, 
however,  it  has  become  increasingly  difficult  for  those  charged  with  the  actual  admin- 
istration to  select  seventy-five  or  one  hundred  colleges  from  among  the  great  num- 
ber of  institutions  in  the  United  States  and  Canada  without  making  discriminations 
which  have  little  basis  in  fact.  In  a  given  state  or  province,  for  example,  no  conclu- 
sive reasons  in  some  cases  can  be  given  for  discriminating  in  the  matter  of  pensions 
between  college  A  and  college  B.  Both  are  strong  colleges,  both  are  doing  useful  work, 
both  are  active  human  agencies  for  human  upbuilding.  There  seems  no  valid  reason 
to  prefer  one  above  the  other  for  the  conferring  of  so  great  a  benefit. 

10.  From  the  standpoint  of  the  colleges  and  education  the  experience  of  ten  years 
has  also  brought  to  light  another  weakness  in  the  maintenance  of  a  free  pension  sys- 
tem in  a  limited  number  of  colleges.  This  lies  in  the  tendency  of  such  an  aiTange- 
ment  to  restrict  migrations  of  teachers  from  one  college  to  another.  It  is  in  the  in- 
terest of  education  that  these  migrations  be  free,  and  that  no  difficulty  be  put  in  the 
way  of  a  transfer  of  a  teacher  from  one  college  to  another.  It  is  particularly  desirable 
that  weaker  colleges  under  special  arrangements  should  be  able  to  draw  able  teach- 
ers from  the  stronger  institutions.  One  such  man  in  a  weak  college  raises  the  status 
of  the  whole  group  of  teachers.  The  institution  of  a  free  pension  system  in  a  limited 
group  of  colleges  seriously  hampers  such  free  interchange. 

The  plan  of  insurance  and  annuities  that  I  have  endeavored  to  describe  would 
entirely  obviate  such  a  difficulty.  Not  only  would  the  plan  be  sufficiently  comprehen- 
sive to  embrace  all  colleges  having  the  educational  and  financial  strength  to  partici- 


58       INSURANCE  AND  ANNUITIES  FOR  COLLEGE  TEACHERS 

pate  in  it,  but  the  teacher  having  an  individual  contract  would  take  this  with  him 
whether  he  served  in  one  college  or  another.  In  this  respect  he  would  be  entirely  in- 
dependent. What  would  actually  happen  under  such  circumstances  would  be  to  the 
financial  gain  of  the  individual  teacher,  for  the  weaker  college,  in  its  desire  to  obtain 
the  strong  man,  would  in  many  cases  be  willing  to  pay  the  whole  of  his  insurance  in 
order  to  secure  his  service.  Such  a  plan  makes  not  only  for  free  interchange  but  for 
a  better  financial  status  of  the  teacher. 

The  weaknesses  here  frankly  set  forth  are  those  which  time  and  experience  have 
revealed.  It  is  believed  that  in  the  plan  proposed  in  the  preceding  pages  these  difii- 
culties  are  completely  met. 

The  Desires  of  Teachers 

Perhaps  no  more  thoroughgoing  effort  has  ever  been  made  to  ascertain  the  actual 
wishes  and  the  desires  of  teachers  than  that  which  has  been  carried  out  by  the  Foun- 
dation in  thematter  of  an  insurance  and  annuity  plan.  There  was  sent  to  each  of  these 
five  thousand  teachers  in  the  associated  colleges  an  enquiry  concerning  insurance,  ask- 
ing a  reply  to  certain  questions  and  inviting  the  teacher  to  add  any  statement  re- 
flecting his  own  experience,  his  wishes,  or  his  needs.  In  addition  a  letter  has  been  sent 
to  every  teacher  who  has  enjoyed  the  possession  of  a  pension,  asking  his  judgment 
as  a  man  who  had  been  thru  the  experience  of  the  teacher  and  who  had  retired,  as 
to  the  working  of  the  pension  plan,  and  as  to  any  features  of  it  which  in  his  judg- 
ment might  be  bettered.  The  answers  to  these  enquiries  have  been  most  illuminat- 
ing. Many  of  them  have  been  written  with  freedom,  and  they  no  doubt  voice  the 
essential  desires  and  reflect  the  attitude  of  the  great  body  of  teachers. 

The  project  for  furnishing  insurance  at  cost  thru  the  Foundation  met  with  prac- 
tically unanimous  endorsement.  Teachers  keenly  appreciate  the  opportunity  to  obtain 
such  insurance,  and  also  the  opportunity  for  a  secure  investment  in  the  hands  of  those 
who  are  financially  responsible. 

The  desire  for  insurance  expressed  by  these  teachers  is  very  general,  but  the  most 
common  reason  given  for  it  is  the  compulsory  character  of  the  insurance  payment. 
Teachers  write  that  they  can  save  for  insurance  when  they  can  save  in  no  other  way. 
One  university  teacher  of  long  experience  sums  it  up  admirably  in  the  following 
statement : 

"I  incline  almost  to  a  sort  of  compulsory  insurance  because  of  my  experience  that 
some  of  my  best  subordinates  simply  expand  their  style  of  living  with  every 
increase  of  salary." 

Very  few  letters  speak  of  the  insurance  experience  of  the  writers  with  entire  satis- 
faction. Mutual  companies  are  commended  as  being  cheaper  than  others.  Limited  pay- 
ments are  commended  by  some.  On  the  other  hand,  the  experience  of  many  teachers 
with  insurance  has  apparently  been  unfortunate,  and  in  a  great  many  cases  the  insur- 


THE  OPINIONS  OF  RETIRED  TEACHERS  69 

ance  has  served  simply  for  a  security  to  be  wiped  out  by  a  debt.  One  professor  writes : 
"I  have  carried  almost  all  forms  of  insurance.  Nearly  all  of  these  have  been  given  up." 
One  professor  paid  more  than  one-third  of  his  total  income  for  insurance.  Another  is 
burdened  with  the  cost  because  he  is  a  sub-standard  risk.  Some  complain  that  inex- 
pensive straight  life  policies  have  small  cash  values.  Others  state  that  when  insurance 
has  been  taken  out  as  a  security  for  a  loan,  the  loan  has  been  hard  to  pay.  Many 
warnings  are  given  by  these  teachers  against  any  form  of  assessment  insurance  and 
against  the  tontine  policies  issued  by  various  companies.  The  strong  New  York  com- 
panies are  particularly  criticized  in  this  respect  for  their  past  histories.  One  teacher 
who  had  been  promised  $3800  on  a  twenty  payment  policy  by  one  of  these  companies 
states  that  he  received  $1400.  In  general  the  teacher  who  has  put  his  money  in  any 
form  of  endowment  insurance,  or  in  other  words  who  has  treated  insurance  as  an 
investment,  has  been  disappointed.  Some  teachers  suggest  easy  medical  examinations 
or  none,  so  that  all  may  be  included. 

From  all  these  letters  it  is  evident  that  the  form  of  insurance  most  needed  is  a 
term  insurance  that  will  protect  the  family  up  to  the  time  when  a  retiring  allow- 
ance is  available,  and  this  suggestion  has  been  followed  in  the  plan  hitherto  outlined. 
Some  form  of  protection  for  those  who  enter  teaching  late  in  life  will  still  need  to 
be  devised,  but  such  instances  are  rare,  and  they  will  form  subjects  of  special  agree- 
ment between  the  teacher  and  his  college. 

Perhaps  the  most  common  note  struck  in  all  these  letters,  whether  from  teachers 
in  active  service  or  from  those  who  have  retired,  is  the  expression  of  a  desire  to  par- 
ticipate in  the  payment  of  their  own  pensions  rather  than  to  receive  them  as  a  fi-ee 
gift.  Such  an  expression  of  independence  and  manliness  is  exactly  what  one  would 
expect  from  American  college  teachers.  It  voices  a  sentiment  which  does  credit  both 
to  their  sense  of  justice  and  to  their  personal  dignity. 


The  Opinions  of  Retired  Teachers 

To  every  teacher  receiving  a  retiring  allowance  there  was  sent  early  in  the  present 
year  a  letter,  asking  him  to  express  his  opinion  as  to  the  value  of  the  retiring  allow- 
ance, to  give  any  criticism  of  the  existing  rules,  and  in  general  to  make  such  sugges- 
tions as  in  his  judgment  seemed  to  be  for  the  betterment  of  conditions,  and  which 
would  throw  light  upon  the  question  of  when  a  teacher  should  retire,  as  to  what  sort 
of  satisfaction  he  found  in  his  retired  life,  and  the  financial  situation  which  confronts 
retired  teachers.  The  answei"s  to  this  enquiry  touched  upon  all  pha,ses  of  the  teach- 
er's problem. 

A  number  of  these  teachers  consider  that  their  retirement  was  too  early;  a  few  say 
that  they  were  forced  out,  but  most  consider  that  their  time  of  retirement  was  well 
chosen.  All  express  a  sense  of  loss  at  separation  from  students  and  comrades.  A  few 
welcomed  retirement  as  a  relief  from  heavy  burdens,  especially  those  of  administration. 


60       INSURANCE  AND  ANNUITIES  FOR  COLLEGE  TEACHERS 

Only  a  single  teacher  gives  expression  to  the  feeling  that  he  has  found  retirement 
irksome.  Others,  according  to  health  and  inclination,  have  enjoyed  their  well-earned 
leisure  in  reading,  in  rural  life,  in  travel,  or  have  continued  in  varying  measure  their 
former  occupations.  Physical  activity  has  varied  from  little  or  none  to  that  of  a 
professor  of  seventy-one,  who  built  a  house,  constructed  and  played  on  three  tennis 
courts,  and  wrote  a  book,  all  in  one  year. 

Most  of  these  retired  teachers  give  occasional  lectures  and  addresses,  and  visit  alumni 
gatherings  and  philanthropic  and  religious  meetings.  Scholarly  activity  continues  in 
many  cases,  sometimes  with  regular  attendance  in  laboratory  or  study.  Literary  and 
scientific  production  varies  from  one  article  in  half  a  dozen  years  to  a  substantial 
volume  and  sundry  papers  annually. 

Retired  teachers'  experience  is  that  the  difference  between  salary  and  retiring  al- 
lowance prevents  unnecessary  retirements.  In  about  one-third  of  the  cases  of  those  at 
present  on  the  retired  list  the  allowance  is  the  sole  source  of  income;  altho  with  care 
and  simplicity  of  life  it  is  found  possible  to  live  upon  it,  the  loss  of  the  former  salary 
has  been  inconvenient.  In  general  the  circumstances  of  these  retired  professors  ap- 
proximate entire  comfort.  In  ten  cases  the  Foundation's  retiring  allowance  is  supple- 
mented by  the  universities,  which  sometimes  make  up  the  full  equivalent  of  active 
pay.  In  other  cases  the  retiring  allowance  is  helped  out  by  modest  inherited  prop- 
erty or  savings,  and  in  still  other  cases  by  earnings  fi*om  $100  to  $1000  a  year  from 
the  activities  already  referred  to,  or  from  business  or  professional  work.  Only  a  single 
professor  states  that  he  finds  it  necessary  to  work  hard,  his  expenditures  requiring 
double  the  amount  of  his  retiring  allowance. 

The  inevitable  influence  upon  salaries  of  the  prospect  of  a  pension  is  referred  to 
by  various  retired  teachers.  The  opinion  is  expressed  that  this  may  either  increase 
or  decrease  salaries.  Three  professors  note  an  unfavorable  effect  upon  salaries.  Others 
state  that,  so  far  as  they  have  observed,  salaries  have  not  been  affected.  It  is,  how- 
ever, recognized  that  a  teacher  will  discriminate  in  favor  of  an  institution  which 
supports  a  pension  system. 

One  professor  expresses  the  opinion  that  the  best  professors  should  have  full  pay 
for  life,  altho  no  criterion  for  selecting  these  preferred  teachers  is  offered.  The  gen- 
eral testimony  of  this  correspondence  is  that  it  would  be  better,  and  that  it  should 
be  possible,  for  the  professor  to  accumulate  his  own  pension.  The  opinion,  however, 
is  expressed  that  present  and  prospective  salaries  are  inadequate  for  this.  Debts  in- 
curred for  study  are  slowly  paid,  the  usual  saving  being  only  for  insurance,  and  that 
with  difficulty.  It  may  be  stated  in  passing  that  such  a  plan  of  saving  as  has  been 
proposed  in  the  preceding  pages  would  be  considered  by  these  teachers  quite  within 
the  reach  of  the  typical  teacher. 

A  few  teachers  believe  that  saving  might  be  encouraged  or  made  obligatory  by  the 
contribution  of  the  colleges.  A  bursar  in  one  institution  is  firmly  of  the  opinion  that 
teachers  are  extravagant  and  improvident,  but  there  is  general  agreement  among 


THE  OPINIONS  OF  RETIRED  TEACHERS  61 

retired  teachers  themselves  as  to  the  stern  pressure  of  family  and  academic  expenses. 
One  professor  would  deter  men  from  entering  teaching  unless  they  had  independent 


income 


One  bad  result  is  thought  by  some  of  the  retired  teachers  to  have  been  caused  by 
the  Foundation,  and  this  is  the  making  of  professional  tenure  firmer  by  creating  a 
vested  financial  interest  in  a  prospective  pension. 

Among  the  suggestions  from  retired  teachers  are  a  number  for  modifications  in 
the  details  of  the  present  system,  but  these  suggestions  are  by  no  means  accordant, 
those  made  by  one  professor  being  quite  frequently  opposed  by  those  from  another. 
Among  the  suggestions  made  are  the  following:  the  inclusion  of  denominational  col- 
leges, the  exclusion  of  state  institutions,  no  further  additions  to  the  accepted  list, 
more  retiring  allowances  outside  the  accepted  list,  retirement  at  a  fixed  age,  retire- 
ment at  an  age  later  than  sixty-five,  no  obligatory  age  for  retirement,  retirement  on 
the  beisis  of  service  rather  than  upon  age,  allowances  only  in  case  of  financial  need  and 
not  to  those  who  have  independent  means,  larger  allowances  for  small  salaries,  earlier 
disability  allowances,  temporary  disability  allowances  and  earlier  retiring  allowances 
for  women,  increased  allowances  for  late  retirement,  a  maximum  allowance  of  $2500, 
the  addition  of  a  system  of  life  insurance,  a  closer  emeritus  relation  to  the  institution, 
and  checks  in  payment  of  pensions  to  be  sent  directly  to  the  professor  rather  than 
thru  the  institution. 

It  is  but  fair  to  say  that  throughout  these  letters  there  has  been  most  generous 
commendation  of  the  present  arrangements  of  the  payment  of  pensions  and  a  hearty 
appreciation  of  the  influence  and  the  work  of  the  Foundation  in  general.  More  than 
all  else,  however,  the  inclusion  of  widows'  pensions  in  its  scheme  enlists  the  grati- 
tude of  these  retired  professors. 


li'Sl 


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U.C.  BERKELEY  UBRARIES 


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